The Italian tourist industry breathed a sigh of relief on Tuesday after the government ditched plans to start taxing holidaymakers.
The government said it was scrapping an amendment to the 2007 budget which would have allowed Italian towns and cities to tax foreign and domestic visitors up to five euros per day with the charge added on to their hotel fees.
The aim of the levy was to boost local government funds for tourist services and facilities and help keep cities that are tourist magnets clean and well maintained.
The country's three most visited cities, Rome, Florence and Venice, expressed support for the optional tax but smaller centres and tourist businesses heatedly protested that it would damage tourism and put foreigners off visiting Italy.
The opposition also slammed the idea, which was first floated in the summer, and even the centre-left governing coalition was divided on the issue.
Culture and Tourism Minister Francesco Rutelli said on Tuesday that it was a "wise decision" to drop the tax.
"Italy needs to be competitive in the tourism sector and this charge would not have helped," he said.
The minister, who is also deputy premier, said that cities and towns struggling to cope with floods of tourists would receive other forms of help from the government.
Tourism associations also applauded the government's decision.
"We are truly relieved... We are not representing selfish industry interests here because tourism is a sector which helps keep the entire Italian economy going," said Assotravel, the national association of tourist agencies.
"This is a great victory," said another association, Confturismo.
Hotel owners, who had balked at being forced to put their prices up and had feared the measure would drive their guests away, were also pleased.
Foreign tour operators were already up in arms over the proposal, with some threatening to boycott Italy.
The German Association of Tour Operators (DRV) warned that a similar initiative on the Spanish island of Majorca in 2002 led to a sharp drop in the number of German tourists who visited the island.
But some mayors criticised the government's retreat on the tax.
Florence Mayor Leonardo Domenici said the government's behaviour was "damaging and incomprehensible" and that he would be forced to put up local rates to cover the costs caused by tourism.
"This tax was not meant to penalise tourists but make them contribute to the costs of maintaining its monuments and keeping the city clean, safe and organised, which is in the interests of the tourists themselves," he said.
Meanwhile, the opposition attacked the six-month-old government, saying repeated backpedalling on the 2007 budget was generating confusion.
Former justice minister Roberto Castelli said that "first they put in a tax on tourists and then they take it out... It's pathetic".
Hard-right MP Alessandra Mussolini, the granddaughter of Fascist dictator Benito, said the government was "schizophrenic".
"It's 'no' to the tourism tax for now but this follows on the heels of hundreds of other measures that have been presented and then withdrawn... It's time (Premier Romano) Prodi was sent packing," she said.
The 40-billion-euro deficit-cutting budget, branded a tax sting by the opposition, has dented Prodi's post-election popularity.
The government has been accused of mishandling its presentation of the manoeuvre, with a series of contradictory changes and announcements creating a sense of budget chaos in the public mind.
The package must be approved by parliament by the end of the year but Prodi has a majority of just one seat in the Senate and is fighting to retain unity on the manoeuvre among his own nine-party coalition.
Some 7,000 budget amendments have been tabled in parliament including 2,000 from the governing majority and more than 250 from cabinet ministers who actually approved the package.
But the European Union and the International Monetary Fund have praised the hefty budget, saying it is essential for consolidating Italy's wobbly public accounts.
