Italy says Europe not ready for tax harmonisation

He was responding to proposals by German Chancellor Angela Merkel, backed by French President Nicolas Sarkozy, for a "competitiveness pact" which provoked opposition among EU leaders when presented at an EU summit on Friday.

The proposals, meant to strengthen fiscal discipline in the euro zone and other EU states, included plans to align taxes, end wage indexation, raise retirement ages and lock debt limits into national constitutions across the euro zone.

"There are issues in the pact that Europe is not ripe to solve yet, this includes for example harmonisation of taxes and tax systems," Frattini told reporters during a visit to Prague.

Italy, which has the EU's second highest debt-to-GDP ratio after Greece, also dislikes the proposal to anchor binding debt reduction targets in its constitution.

Merkel made clear that agreement on the measures must be sealed in March before she will agree to strengthening the rescue fund for debt-stricken euro zone countries.

But Frattini said any such decisions needed a wider discussion and he could not see an agreement at an EU summit on March 24-25.

"(Tax policy) is probably one of the most sensitive issues. Frankly speaking, I believe it is premature to have even an agreement in principle on harmonising taxation." He said the bloc's executive arm, the European Commission, as well as European finance ministers should consider all proposals for common policies.