Italy's Letta tipped to defeat Berlusconi challenge

Italian Prime Minister Enrico Letta is tipped to win a nail-biting parliamentary confidence vote Wednesday which would deal a major blow to Silvio Berlusconi but could leave Italy more frail than ever. Letta's survival hinges on rebels within Berlusconi's centre-right People of Freedom party (PDL), who are considering splitting from the media mogul after he called time on the government and pulled his ministers from the cabinet. "Despite the risks, I have decided to put an end to the Letta government," Berlusconi said in a letter to Tempi magazine published Tuesday, in which he blamed Letta and Italy's president for not protecting him from his legal woes. The billionaire tycoon has called for his party to vote against the motion of confidence in the government. But he was left on the back foot on the eve of the vote after his chief protege -- Interior Minister Angelino Alfano -- said he was "firmly convinced that our party as a whole should vote confidence". Tensions within the country's uneasy coalition have spiked since Italy's top court upheld a tax fraud conviction against Berlusconi in August and calls from his allies for a pardon from President Giorgio Napolitano fell on deaf ears. Despite fears that political instability could undermine efforts by the euro zone's third-largest economy to rein in its budget deficit, the three-time former premier has called for fresh elections, convinced of his enduring popularity. Daniela Santanche, a hardline Berlusconi loyalist nicknamed "The Pythoness" for her hardline stances, offered her "head on a plate" in sacrifice if it would keep his party united. But senior party figures have said 40 PDL senators are ready to vote for the government, which would hand Letta the overall majority he needs. The premier holds a comfortable majority in the lower house but is only sure of 137 votes from his own Democratic Party (PD) and centrist allies in the Senate -- meaning he needs at least 24 extra to secure the 161-seat majority there. He may be able to count on a few votes from opposition parties such as the anti-establishment Five Star Movement, but has sworn not to limp on without strong enough support to implement much-needed economic and structural reforms. Letta is scheduled to address the Senate from 0730 GMT, which will then hold the vote of confidence, followed later in the day by the Chamber of Deputies lower house. Even if he clinches Wednesday's vote, analysts have warned that his government -- which was cobbled together after a February election ended in a lengthy deadlock -- will necessarily be weaker with Berlusconi in opposition. If he loses the vote, President Napolitano will be forced to try and cobble together a new government or send the country back to the polls, a move which political observers agree risks ending in yet another stalemate. While investors appear confident Letta can survive, with stock markets closing 3.11 percent higher on Tuesday, analysts warn recession-hit Italy's fiscal policy targets are at risk and the drama is delaying the 2014 budget. The country is suffering the longest downturn since the Second World War and is struggling to meet a public deficit target of 2.9 percent for this year -- under the EU-mandated 3.0 percent. The jobless rate has also returned to a record high of 12.2 percent, with youth unemployment also at its highest ever level of 40.1 percent. If those Berlusconi slams as "traitors" do decide to vote pro-Letta, it not only risks tearing apart a party that has dominated the political scene since the early 1990s but would leave the 77-year-old increasingly friendless. A Senate committee on Friday will decide if he should be expelled from parliament under a new law aimed at cleaning up Italian politics. Berlusconi is also appealing other convictions for having sex with an underage 17-year-old prostitute and for abuse of office when he was prime minister.