* Berlusconi allies renew threat to resign
* Senate committee to decide on Berlusconi future on Oct. 4
* Pressure rises as PM Letta seeks to reassure foreign
By James Mackenzie
ROME, Sept 26 Centre-right deputies supporting
Silvio Berlusconi renewed threats to resign if their leader is
expelled from parliament and the left demanded an end to their
"blackmail", deepening uncertainty in Italy's fragile ruling
Italy has been close to crisis since Berlusconi, a partner
in the coalition government, was sentenced to four years in
prison, commuted to a year under house arrest or in community
service, for tax fraud. It included a ban on holding public
office that is under appeal.
Late on Wednesday, Berlusconi's allies made their latest
pledge to bring down the government, saying they would resign if
a special Senate committee meeting on Oct. 4 voted to strip
Berlusconi of his seat.
How serious the threat is difficult to assess following a
series of contradictory signals from Berlusconi's allies in
parliament, who are divided between a faction of hardliners and
more conciliatory doves.
On Thursday, Transport Minister Maurizio Lupi said there was
no joint commitment to stand down by the centre-right and any
decision to resign would be up to individual deputies.
"The resignation of the parliamentarians is a decision which
will depend on the conscience of each individual," he told RAI
However, the centre-left Democratic Party (PD) said the
threats risked undermining the government as it grapples with
problems such as its strained public finances to the fate of
Italian companies including Telecom Italia and
national carrier Alitalia.
"Unfortunately, this back and forth with threats weakens an
equilibrium which is already very delicate," Luigi Zanda, Senate
floor leader of the PD, told the daily Corriere della Sera
PD leader Guglielmo Epifani accused the centre-right of
"blackmail" but said the party would not change its approach and
would vote to strip Berlusconi of his seat.
Berlusconi's political fate has been in the balance since
last month when Italy's highest court confirmed the tax fraud
conviction, which is likely to trigger his expulsion from
parliament under a procedure going through the Senate committee.
Increasing pressure on the coalition from Berlusconi's Forza
Italia (FI), came hours after Prime Minister Enrico Letta sought
to reassure international investors in New York of the country's
stability. The party had stepped back from similar declarations
in recent days.
Letta has repeatedly said that Italy needs political
stability while it struggles to emerge from more than two years
of recession, rein in a 2-trillion-euro ($2.7-trillion) public
debt, and bring its budget deficit under control.
President Giorgio Napolitano, who would have to decide
whether to call new elections or seek to build a new coalition
if the centre-right pulls out of the government, has also
repeatedly said he does not want a vote.
But the constant tension between the coalition partners has
undermined reform efforts and ensured that weeks have been
wasted in wrangling over issues including tax cuts and
Berlusconi's political future.
Financial markets have shown none of the panic seen during
previous government crises in 2012 or at the height of the euro
zone debt crisis in 2011, but borrowing costs have ticked up
during the latest bout of uncertainty. On Thursday, yields on
Italy's 10-year bonds rose by six basis points.
Even as the Senate committee votes on Berlusconi's future
approaches, a battle is looming over sales tax, which is due to
rise by one percentage point in October unless the government
can find the resources to cancel it.
Berlusconi's allies are demanding the increase be averted
despite the pressure on public finances and a pledge by Economy
Minister Fabrizio Saccomanni to resign if the government reneges
on its pledge to bring the deficit within European Union limits.
Polls indicate holding an election soon could give a split
result like the one which forced the traditionally opposed
centre-left PD and the FI to rule together.