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Berlusconi Conviction Threatens Fragile Italian Government

16/09/2013 13:14 BST | Updated 15/11/2013 10:12 GMT

Few politicians have cast such a long shadow over a country, across an extended period of time, as Silvo Berlusconi. Palpable relief greeted the politician and media tycoon's resignation as Italian PM in November 2011, against a backdrop of severe doubt regarding his commitment to implementing economic reforms necessary to tackle the nation's debt crisis. With Berlusconi's third and certainly final term safely over, and notwithstanding the amusing antics that he will be remembered for, many felt reassured that the world's most famous 'bunga bunga party' attendee would surely fade from the political landscape.

Such hopes proved to be decidedly short-lived. Having vowed a few months previously to leave "this shitty country of which I'm sickened", in December 2012 Berlusconi announced that he would again run for PM in the forthcoming general election. Remarkably, his centre-right People of Freedom party achieved 29% of the popular vote. With no party emerging in a strong enough position to control both chambers and so govern alone, two months of chaotic negotiations ensued, eventually leading to a Grand Coalition between the centre-left Democratic Party, People of Freedom, and outgoing technocratic PM Mario Monti's Civic Choice party. Silvio was back.

This being Berlusconi, though, the narrative just wouldn't be complete without a criminal case (or three) hanging over proceedings. In August the former PM had a conviction for tax fraud reaffirmed by Italy's final court of appeal - his first unassailable judicial defeat in almost thirty cases spanning 25 years. People of Freedom loyalists insisted that their political godfather was the victim of a leftist magistrates' conspiracy. Although sentenced to jail, Berlusconi will be able to see out the one-year term under house arrest or by participating in community service on account of his age. In the coming weeks the conviction also threatens to bring down Italy's fragile coalition government.

A Senate panel will convene on Wednesday to determine whether Berlusconi should be stripped of his seat, prompted by an anti-corruption law passed by the Monti administration that sought to prevent serious criminals from running for public office. The situation is massively complicated both by the injustice felt by many in the People of Freedom party; and by the reality that PM Enrico Letta needs the support of Berlusconi's bloc for the shaky government to survive. Berlusconi supporters and the man himself have threatened to withdraw their support for the coalition should centre-left members, which will comprise a majority of the panel, disqualify him. The growing tension has caused Italian bond yields to tick upwards - not ideal in a country that still has enormous economic issues, and is subject to strict deficit reduction targets imposed by the European Commission.

In recent days Letta has pleaded for calm, stating that Italy "can no longer afford this instability based on political games". He has warned Berlusconi's allies that should they drag Italy into a renewed period of chaos they will have to face up to the electorate. The People of Freedom party is split between those hardliners who are willing to do so and moderates who want to make government work; however the risk cannot be overstated. In Letta's own words: "[e]verything depends on stability, without stability we have no chance of pulling through". The spike in state borrowing costs resulting from a fresh constitutional crisis would make it far more difficult for Italy to reform its economy. This would be particularly unfortunate coming at a time when the Eurozone is showing tentative signs of returning to growth, after the European Central Bank's promise last year to do whatever was necessary to save the euro calmed bond markets. Similarly to several other Eurozone states, Italy is still vulnerable to further political and economic shocks forcing it back over the precipice. Furthermore, given the unique interconnectedness of Eurozone markets a single sharp shock could have serious ramifications for the entire bloc.

The inherent political sensitivities involved mean that Senate deliberations are likely to drag on for weeks. If the panel does decide to expel Berlusconi the issue would then progress to a full vote; pessimists, however, believe that the media tycoon may preempt this by withdrawing his support for the government as soon as the panel has come to its decision. Equally, there is the very real possibility that Berlusconi - approaching the end of his political career - will not want to be remembered as the man who brought down the Italian government and threatened Eurozone stability. Whatever happens, it is likely to be a bumpy ride for the Italians - no strangers to such in the last few months after the most uncertain election results in recent times. It would appear that one individual can cast a very long shadow indeed.