Italy nears agreement on housing tax deal critical to government survival

The Italian government appears to be nearing agreement on repealing Italy's housing tax, a crucial deal for the survival of Premier Enrico Letta's unusual left-right coalition.

Silvio Berlusconi's People of Freedom has demanded a total abolition of the tax. But the Treasury Ministry is struggling to make up for the 4 billion euro ($5.3 billion) annual shortfall. Letta's center-left Democratic Party supports only a partial suppression of the tax.

Berlusconi allies have seemed upbeat that a deal can be reached. A Cabinet meeting is planned for later Wednesday to discuss the tax.

Analysts say a deal could strengthen Letta's hand as he tries to keep his government alive by depriving Berlusconi of the excuse to yank his support for the government because it failed to do away with the tax.