Rupert Murdoch’s Sky Italia paybox Tuesday blasted production quotas being drafted by the Italian government and threatened to break its existing pact with producers’ orgs Anica and API if they become law.

Taking the gloves off in what has been an ongoing dispute, Sky Italia corporate communications chief Tullio Camiglieri said Sky will void the current agreement under which it automatically buys rights to any Italian film with more than 20,000 admissions at the local box office, if regs are introduced extending the country’s production quotas for terrestrial webs also to pay TV.

The proposal , somewhat similar to those in France, are written into Italy’s upcoming budget, along with eagerly awaited film tax breaks.

“I want to underline that we are not producers,” said Camiglieri at a packed press conference at Rome’s Casa del Cinema. “Therefore, if the budget bill that would force us to invest 3.5% of our revenue in Italian cinema were to pass, our agreement with Anica and API would cease to be valid.” He then blasted the bill as part of a “subsidy policy.”

Under its current deal with Anica and API, Sky Italia, which is Italy’s single paybox, aired some 1,000 Italian pics in 2006, and invested about E60 million ($84 million).

The proposed regs would force Sky to spend roughly $120 million on Italo productions this year.

As an apparent olive branch, Sky Italia announced it is launching a daily show in tandem with Anica dedicated to promoting Italo cinema called “Cinema al Cinema,” which will air on its premium channels.

Camiglieri also announced the start of production on two cutting-edge local dramas: “Moana,” a biopic of late Italo porn star Moana Pozzi, who died young and was widely admired by Italians, and “L’ombra di Satana,” about Satanic sects. Sky Italia has also just pre-bought rights to Paolo Sorrentino’s potentially explosive “Il Divo,” a biopic of Giulio Andreotti, the country’s seven-time former prime minister tried and acquitted of Mafia ties.