* Economy minister: Crisis would put fiscal goals at risk
* Warns of ruinous credibility loss if deficit target missed
* Berlusconi appeals to European Court of Human Rights
By Giancarlo Navach
CERNOBBIO, Italy, Sept 7 Italian government
leaders expressed hope on Saturday that the fragile ruling
coalition could avoid a breakdown that would threaten strained
finances and risk wrecking the trust won during months of
"I am confident, I believe there won't be a crisis," Economy
Minister Fabrizio Saccomanni told reporters on the sidelines of
a business conference in the northern town of Cernobbio.
He warned that Italy risked a "totally unforgivable loss of
credibility" if political turmoil disrupted efforts to keep its
public deficit within European Union limits and renewed doubts
about its budget stability.
There have been weeks of tension over the political future
of centre-right leader Silvio Berlusconi after Italy's top court
found him guilty of being at the centre of a vast tax fraud
conspiracy at his Mediaset broadcasting empire.
Allies of the former premier have said they could pull out
of Prime Minister Enrico Letta's unwieldy left-right coalition
if centre-left members of a Senate panel vote to strip
Berlusconi of his seat in the upper house of parliament.
However, senior allies of the 76-year-old media billionaire
have struck a more conciliatory tone in the past two days,
following a statement from President Giorgio Napolitano warning
parties against provoking another crisis.
"The country needs responsibility. We have guaranteed this
sense of responsibility today," Renato Schifani, the floor
leader in the Senate of Berlusconi's People of Freedom (PDL)
party, told SkyTG24 television.
The cross-party panel, in which the centre-left Democratic
Party (PD) holds the largest number of seats, meets on Monday
but it may take weeks for the complicated procedure that could
lead to Berlusconi's expulsion from parliament to be completed.
Letta told the BBC in an interview that he was confident the
government would now carry on.
But political risks have weighed on Italian government bonds
in recent sessions and analysts say Rome may see weaker demand
and be forced to pay higher yields at an auction next week if
investors believe the government risks collapse.
A breakdown of the coalition, raising the prospect of early
elections at a time when Italy should be planning next year's
budget, would push yields on Italian government bonds further
up, increasing debt payments, Saccomanni warned.
"Fresh tensions on government bonds would make it more
difficult (for Italy) to manage the budget deficit and keep it
within the 3 percent limit," he said.
COURT OF HUMAN RIGHTS
As the manoeuvring continued, Berlusconi's lawyers filed
documents for an appeal to the European Court of Human Rights in
Strasbourg to have the law under which he could be expelled from
parliament declared invalid in his case.
The appeal says that the so-called "Severino law", which
makes politicians convicted of serious offences ineligible for
parliament, should not apply to Berlusconi because it was only
passed last year, after the events over which he was convicted.
The centre-left Democratic Party has rebuffed PDL efforts to
delay the Senate panel hearing while a separate appeal to
Italy's constitutional court is heard, and party leaders
appeared to rule out any accommodation.
"If anyone decides to pull the plug on the government if
Silvio Berlusconi is declared ineligible as senator, they will
have to take responsibility before the country and the
international community," PD leader Guglielmo Epifani told a
party conference in Genoa.
Berlusconi allies have accused the PD of colluding with what
they call leftist magistrates to eliminate the media tycoon
politically and say any crisis would be its fault.
The friction within the coalition, established after the
inconclusive election in February that left no party able to
form a government, has reawakened memories of 2011 when Italy
came close to dragging the euro zone into a life-threatening
The euro zone's third largest economy is still stuck in its
longest postwar recession and is facing rising headwinds as it
fights to keep its deficit under the EU's limit of three percent
of gross domestic product.
The main gauge of investor confidence, the risk premium
demanded by investors for Italian 10 year government bonds over
safer German Bunds, has crept up steadily although it is still
well off the dramatic levels seen two years ago.