UPDATE 4-Berlusconi suffers serious setback in Italy polls

Tue May 17, 2011 1:14pm EDT

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* Forced to run-off in Milan, and trailing centre left

* Centre-left sweeps Turin, wins Bologna

* Analysts predict instability

(Adds Berlusconi lying low, comment, edits)

By Barry Moody

ROME, May 17 (Reuters) - Italian Prime Minister Silvio Berlusconi has suffered a serious blow in local elections that punctured his image of political invincibility and could usher in a period of instability.

Aides said he was "surprised and saddened" by the results.

Both Berlusconi's PDL party and its Northern League allies did badly in the first round of voting on Sunday and Monday in elections in 1,310 towns and 11 provinces. The polls were seen as a key test for the premier midway through his third term.

Berlusconi's centre-right bloc suffered the biggest shock in their stronghold of Milan, trailing a centre-left candidate who forced them into a run-off for the first time in 14 years.

Berlusconi, embroiled in a sex scandal and facing three corruption trials, received 47 percent less preference votes than he did at the last election in Milan five years ago.

In contrast to the period before the vote, when he bombarded the air waves with comments in a round of frenetic campaigning, Berlusconi remained uncharacteristically silent on Tuesday, 24 hours after polls closed in the two-day first round. The media magnate had turned the elections into a vote on him and his national policies, but the strategy spectacularly backfired.

Analysts said that even though the centre right could fight back in run-offs in two weeks, the vote had already undermined Berlusconi's reputation as Italy's dominant political force for the first time since he stormed to power in 1994.

They widely predicted political instability because the losses damaged an alliance with the anti-immigrant, pro-devolution League, on which his government depends.

Voters sick of nasty political mudslinging led by Berlusconi also rewarded candidates from outside the big parties.

"The Milan vote shakes the legend of the Black Knight (Berlusconi), capable of winning any battle, even the most desperate, with his own strength," said Ugo Magri in La Stampa newspaper.

SETBACK IN HOME TOWN

Massimo Franco, a respected commentator in Corriere della Sera, said the vote had begun "the reassessment of a leader who after presenting himself and being considered by allies as a god, now risks becoming a scapegoat".

Milan's centre-right mayor Letizia Moratti, Berlusconi's candidate, won 41.6 percent of the vote against 48 percent for her rival Giuliano Pisapia, giving the left a chance to win Italy's financial capital for the first time in nearly 20 years.

Her clumsy attempt to tar Pisapia as a dangerous leftist misfired with electors, as did Berlusconi's constant attacks on magistrates who have charged him in four concurrent trials.

Milan is Berlusconi's home town, where he built his business fortune and launched his political career, making the setback there all the more significant.

The vote confirmed indications from opinion polls showing Berlusconi's popularity has been undermined by a sex scandal, three corruption and tax fraud trials and a faltering economy.

"He is saddened, surprised and saddened. He did not expect a result like this," aides told Italian news agency ANSA. The League fared worse than expected in its own heartland and media reported its leader, Umberto Bossi, blamed Berlusconi and his attempts to pass laws to evade a string of prosecutions.

The centre-left swept up Turin and won a first-round victory in its stronghold of Bologna, while Berlusconi's PDL party led in Naples, which is also set for a run-off in two weeks.

"The wind in the north is blowing against the PDL and the League," said Pierluigi Bersani, leader of the largest opposition party, although it paid for its notorious internal squabbles in Naples, where its candidate was eliminated.

The prosecutions against Berlusconi, including one on charges that he paid for sex with an underage prostitute, have pushed his approval rating to about 30 percent, the lowest since he swept back into power for the third time in 2008.

The premier denies all the charges and says politically biased leftist magistrates are hounding him.

Berlusconi is also taking the heat for failing to revive Italy's chronically low growth. The economy expanded just 0.1 percent in the first three months of the year, well below rates in Germany, France and even crisis-hit Greece.

The League, which is vital for Berlusconi's survival after a split in the ruling PDL party last year, has marked its distance from the premier on several issues in recent weeks, notably opposing Italy's involvement in the NATO bombing of Libya.

It had hoped to cash in on Berlusconi's weakness, but it failed to boost its share of the vote in the big cities. In Milan and Turin it won less than 10 percent support. (Additional reporting by Catherine Hornby and Silvia Aloisi; editing by Maria Golovnina)

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