* 5-Star party says rail link a waste of public money
* League leader says project should go ahead
* Italy faces huge penalties if it scrapes the line
By Crispian Balmer
ROME, July 27 (Reuters) - Deputy Prime Minister Matteo Salvini called on Friday for work to continue on an ambitious, Franco-Italian rail link, putting himself at odds with his coalition partners, who have denounced the costly project.
Salvini’s League and the anti-establishment 5-Star Movement laid aside their rivalry in June to forge a government alliance, and although they have pledged to rule together for a full, five-year term, some cracks have started to emerge.
One of the fault lines focuses on the fate of a 270-km (167-mile) high-speed line, known as the TAV, which is due to link the French city of Lyon with Italy’s Turin at an estimated cost of 26 billion euros ($30.2 billion).
Work has already started on the project, but Infrastructure Minister Danilo Toninelli, a 5-Star member, warned this week that no one should “dare to sign off” on advancing the line. “We would consider that a hostile act,” he said.
Two Italian newspapers said on Friday that Prime Minister Giuseppe Conte had agreed with 5-Star that the contested link, which cuts through the heart of the Alps, should be scrapped.
Conte’s office denied the reports, saying that the government was simply fulfilling a promise to review the cost-benefits of the line, which is designed to boost trade between France and Italy, as well as between other EU states.
Salvini confirmed on Radio24 that the review was underway.
“If, by chance, from an official analysis it emerges that we don’t need it, does it cost more to block it than not to pursue it?” Salvini said. “From my point of view, it’s better to go forward than backwards.”
Under the terms of the 2016 TAV deal, the European Union agreed to pay 40 percent of the bill, Italy 35 percent and France 25 percent. Italy has so far spent 400 million euros on preparatory work, but could face large penalties from both Paris and Brussels if it backs out of the project at this point.
A government source said Rome was in contact with France to discuss the enterprise.
Maurizio Martina, the leader of the opposition centre-left Democratic Party (PD), estimated that Italy could be hit with two billion euros of charges and be shut out of further EU infrastructure financing for up to five years as punishment.
“The entire nation will pay for the folly of this government to block the Turin-Lyon line,” he wrote on Twitter on Friday.
At March elections, 5-Star campaigned to scrap three major industrial concerns — the TAV, a transnational pipeline called the TAP and a huge, polluting steelplant in southern Italy operated by Ilva which is set to be sold to ArcelorMittal.
Overriding 5-Star concerns, President Sergio Mattarella told Azerbaijan last week that Italy was fully committed to TAP, which will bring gas from central Asia to western Europe.
Meanwhile, 5-Star leader Luigi Di Maio, who is also industry minister, is reviewing the legality of the Ilva sale contract, but at the same time pushing ArcelorMittal to improve its offer, indicating that he is open to the steelplant staying on line.
La Repubblica newspaper said on Friday the 5-Star leadership had commissioned an private poll that showed they risked losing “a large slice” of support if they reneged on electoral promises regarding Ilva, TAP and TAV.
It said this survey had convinced Toninelli to round on TAV this week. There was no immediate comment on this from 5-Star. ($1 = 0.8602 euros) (Additional reporting by Massimiliano Di Giorgio; Editing by Jon Boyle)