Crunch week for Italy as Berlusconi battles sanction

Italian Prime Minister Enrico Letta has warned against instability as a parliamentary committee prepares for a debate starting Monday on Silvio Berlusconi's expulsion from the Senate following his criminal conviction.

The case has put on edge an uneasy governing coalition made up of Letta's centre-left Democratic Party (PD) and Berlusconi's centre-right People of Freedom (PDL) party in what is the eurozone's third biggest economy.

As Italy struggles to extricate itself from a recession that has caused record unemployment, Berlusconi has once again taken the political centre stage.

The billionaire tycoon has complained that a new law against criminals in parliament adopted last year with the aim of cleaning up Italian politics and approved with votes from his own party violates his human rights.

The three-time prime minister has lodged an appeal with the European Court of Human Rights in Strasbourg arguing that the law should not apply for convictions relating to crimes committed before its adoption as in his case.

A Senate committee is set to start its meeting at 1300 GMT to discuss his ejection, even though stalling tactics from Berlusconi's supporters could drag the process on for months before a compulsory final Senate vote.

Appeals to Italy's Constitutional Court or to the European court could slow down the procedure further, although there is no precise timeline since this type of confrontation is uncharted territory for Italy.

The PD's leadership has said it will vote to apply the law but the PDL argues that Berlusconi should receive "political freedom of movement" since he leads a party for which millions of Italians have voted.

"The law is equal for everyone," Senate speaker Pietro Grasso said earlier, while some of Berlusconi's critics have pleaded with him to resign voluntarily and spare Italy further embarrassment on the international stage.

Berlusconi could continue to lead the party from outside parliament but expulsion would be a heavy blow as he has been a lawmaker ever since entering politics in 1994.

The stand-off follows a landmark supreme court ruling on August 1 which turned down Berlusconi's final appeal against the tax fraud conviction and upheld a 12-month sentence of house arrest or community service.

A court in October will determine the precise punishment for Berlusconi, who has already had his passport withdrawn, with the more likely option being house arrest.

The verdict was the first definitive ruling against him and he is also appealing convictions for having sex with an underage 17-year-old prostitute and abusing his official powers when he was prime minister.

The 76-year-old Berlusconi has repeatedly asserted his innocence and accuses prosecutors of being biased.

His lawyers are considering an appeal to the European court in Strasbourg over the tax fraud ruling.

The uncertainty has hurt Italy on the financial markets, with borrowing costs rising and shares falling -- particularly for Berlusconi's Mediaset business empire.

"Instability carries a cost. It has dramatic costs for businesses," the prime minister said at a conference on Sunday.

"We need a turnaround," Letta said, warning against a return to the "earthquake" that followed elections in February.

The vote failed to give any party control of parliament, leading to a two-month deadlock before a deal between the rival PD and PDL parties created the current coalition.

Most political observers agree that Berlusconi's supporters are unlikely to bring down the current government, even though they have repeatedly threatened to do so if their leader is expelled from parliament.

The PDL is currently first in the opinion polls but it probably would not be able to form a majority in parliament and it might lose votes if it is seen as being the cause of a fresh bout of political instability.

But tensions are still bound to rise in the coming weeks as Berlusconi has shown no sign of backing down despite some of his supporters advocating a more humble approach that could earn him a pardon from the Italian presidency.

Even when he was forced to step down in November 2011 in a dramatic blaze of parliamentary rebellion, financial market panic and sex scandals, Berlusconi said he was only doing so "for the good of Italy".