Sicilian vote, Berlusconi threat add to Italy uncertainty
* Result of Sicily regional election expected on Monday
* Anti-establishment 5 Star Movement seen doing well
* Berlusconi attack on Monti deepens party splits
By James Mackenzie
ROME, Oct 29 (Reuters) - Sicilian local election results will provide clues on Monday to the political impact of Silvio Berlusconi's threat to withdraw support from Prime Minister Mario Monti's government before next year's national election.
Sicilians voted on Sunday for a new regional government but counting only began the next day. An exit poll in regional capital Palermo conducted for local TRM television showed the anti-establishment 5 Star Movement leading with 26 percent.
Turnout was low, with more than half those eligible to vote staying away from a poll seen as a pointer toward the parliamentary election expected in April.
Initial results are expected later in the day, with the focus on the centre-right and the 5 Star Movement of comic Beppe Grillo, which has pledged to fight waste and corruption in local politics. A strong performance for the 5 Star Movement, after its success in local polls in May, would reinforce its status as the main vehicle for disillusion with mainstream parties.
However, Berlusconi's threat on Saturday to unseat the Monti government has complicated the electoral outlook.
The billionaire former prime minister, convicted of tax fraud last week, attacked Monti's austerity policies, announcing that his centre-right party People of Freedom (PDL) may withdraw support from the technocrat government.
That threat, just days after Berlusconi had announced he would not run as leader of the centre-right in the election, has underscored Italy's political confusion.
The weakened PDL is itself split between Berlusconi loyalists, an uncertain faction of former allies from the old National Alliance party and a more moderate, pro-Monti wing.
"The Monti government guarantees the credibility of Italy," former Foreign Minister Franco Frattini, prominent in the moderate faction, told the Corriere della Sera daily on Monday.
He said he hoped the PDL leadership would decide "with a broad consensus" to maintain its year-long backing for Monti's unelected technocrat government in parliament.
TEST IN SICILY
Berlusconi was forced to step down almost exactly a year ago at the height of a financial crisis which threatened to push Italy's huge public debt out of control.
Markets had reacted nervously to the prospect of uncertainty in the euro zone's third largest economy and yields on Italy's 10-year BTP bonds, hovered just under five percent, 345 basis points over the yield of benchmark German Bunds.
Earlier this month, helped by the European Central Bank's pledge of strong action to combat the crisis, the spread had narrowed to as little as 313 points.
PDL secretary Angelino Alfano, 41, had been expected to lead a post-Berlusconi renewal of the party, but his credibility has been severely tested by his patron's repeated interventions and the Sicilian vote will test his ability to lead.
Sicily, a byword for wasteful and corrupt administration, has an unemployment rate almost twice the national average and its economy has suffered badly in Italy's nationwide recession.
The election is expected to reflect the gloomy mood of Italian voters, wearied by repeated tax hikes and spending cuts and disgusted by a wave of political scandals.
The PDL lags in national opinion polls behind the centre left Democratic Party (PD) and the 5 Star Movement. A poor showing in Sicily would exacerbate internal tensions which Alfano has struggled to contain.
The former justice minister, a Sicilian widely seen as a moderate, has been favourite to win a primary for the PDL leadership, but that could change if the Sicilian vote goes badly.
The divisions at national level are reflected locally, where the main centre right candidate for governor, Nello Musumeci, is challenged by a rebel former PDL boss, Gianfranco Micciche.
Musumeci, backed by Alfano, had been leading a tight, fragmented race ahead of Rosario Crocetta, the openly gay, anti-mafia candidate of the centre-left. Micciche, now a bitter enemy of Alfano, may end up as kingmaker.
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