Berlusconi suffers heavy local poll defeats

Italian Prime Minister Silvio Berlusconi suffered a shattering loss in his northern stronghold of Milan on Monday in local elections that threaten to unbalance his fractious centre-right coalition government. Already enmeshed in three corruption trials and a scandal over underage prostitution, the 74 year-old premier lost control of Italy's financial capital, the base of his vast business and media empire, as well as a string of other towns and cities.
With most votes counted, leftist Giuliano Pisapia was set to take Milan's city hall with some 55 percent of the vote against around 46 percent for centre-right mayor Letizia Moratti. "It's clear we have lost. The only thing to do is to hold our nerve and carry on," Berlusconi told reporters accompanying him on a trip to Romania. Among a series of other losses, the southern port of Naples, Italy's third largest city, went to the opposition Italy of Values party by a landslide and the results raised the prospect of national elections before the scheduled 2013 date.
The centre-left easily held on to power in Turin and Bologna in the first round of voting and the latest blow threatened to expose divisions in the ruling alliance between Berlusconi's PDL party and the pro-devolution, anti-immigrant Northern League. The League, whose support is vital to Berlusconi's thin majority in parliament, also suffered heavily, losing control of once-impregnable cities such as Novara or Pavia to deepen alarm in the party over their links to the struggling prime minister.
As the government prepares to bring forward plans to slash the budget deficit by 40 billion euros ($57 billion) after ratings agency Standard and Poor's cut its outlook for Italy's A+ rating to "negative" from "stable", the stakes are high. Italy has one of the most sluggish economies in Europe, more than a quarter of its young people are unemployed and government policy is constrained by the need to contain a debt mountain equivalent to some 120 percent of gross domestic product.
Berlusconi's decision to travel to Romania on Monday was widely interpreted as a sign he expected defeat but senior ministers have ruled out any change of course before national elections due in 2013. Berlusconi's government last month cut its growth forecast for this year to 1.1 percent from 1.3 percent and cut next year's outlook to 1.3 percent from 2.0 percent.