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By NBF News

IN what analysts are predicting that it may raise doubts over the future of his fragile centre-right coalition government, Italian Prime Minister Silvio Berlusconi faces defeat in his northern power base of Milan yesterday in run-off of local elections.

Reuters stated that Berlusconi, who is facing three corruption trials and a lurid sex scandal, and the dominant figure in Italian politics for nearly two decades, suffered a thrashing in last week's first round.

An uninspired centre-left easily held on to power in Turin and Bologna and the stunning setback unleashed divisions in the ruling alliance, with Berlusconi's allies in the Northern League particularly alarmed at the prospect of losing Milan.

Italy's financial capital and the base of Berlusconi's vast business empire has not been held by the left for nearly 20 years. Defeat there would be a shattering blow to the 74-year-old premier that could destabilise the whole government.

First projections after polls closed yesterday showed leftist Giuliano Pisapia ahead in Milan with 52 per cent of the vote against 48 per cent for centre-right mayor Letizia Moratti.

With the southern port of Naples also set to fall to the opposition Italy of Values party, the local elections have been seen as a referendum on the billionaire prime minister.

'Everybody knows that the vote in Milan is likely to change in no small measure the balance of national politics,' Turin daily, La Stampa, said in an editorial.

'If the centre-right should lose the Lombard capital, the first element that could be lost is the fragile balance that keeps Berlusconi and the League on the same side.'

With the government preparing to bring forward plans to slash the budget deficit by 40 billion euros ($57 billion) after ratings agency Standard and Poor's cut its outlook for Italy's A+ rating to 'negative' from 'stable', the stakes are high.

Italy has one of the most sluggish economies in Europe, more than a quarter of its young people are unemployed and government policy is constrained by the need to contain a debt mountain equivalent to some 120 per cent of gross domestic product.

In a move seen widely as a signal that he believed defeat in Milan was likely, Berlusconi chose to travel to Romania yesterday but senior ministers have ruled out any change of course before the next national elections in 2013.

'I don't see any possibility of an alternative government. And I don't think anyone wants early elections,' Defence Minister Ignazio La Russa, one of Berlusconi's most faithful lieutenants, told La Stampa.

In Milan, where Berlusconi launched his political career, Moratti trailed with 41.6 per cent of the first-round vote against Pisapia's 48 per cent.

'I have seen the climate is changing, Milan is really changing,' Milan resident Cinzia Zarotti said after she cast her vote on Monday.

Regional issues including transport, the upcoming Expo 2015 in Milan and the chronic garbage crisis in Naples have weighed on voters' choices but the flailing national economy has overshadowed the polls.

Italy has been the euro zone's most sluggish economy for over a decade, with more than a quarter of its youth unemployed and the average Italian poorer than he or she was 10 years ago.

Berlusconi's government last month cut its growth forecast for the year to 1.1 percent from 1.3 per cent and cut next year's outlook to 1.3 percent from 2.0 percent.

S&P's lowered its outlook on Italy for failing to cut its debt and boost growth, although worries of an immediate impact on the markets eased after the Treasury sold long-term bonds near the top of its target range yesterday.

After being punished for initially characterizing the vote as a referendum on his popularity and policies, Berlusconi has blanketed the airwaves with trademark tirades against his longtime enemies: the left and 'communist' magistrates.

Milan will become an 'Islamic gypsyland' if the left wins, he predicted. Leftist voters lacked a brain anyway, he said, prompting Internet spoofs and a lawsuit from an offended voter.

A rant against Italian magistrates to a surprised President Barack Obama at the Group of Eight summit in Deauville, France prompted Economy Undersecretary Daniela Melchiorre, a former magistrate, to resign in protest.

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