Bloomberg News

Berlusconi Faces Moment of Truth With Top Court’s Final Ruling

July 29, 2013

Silvio Berlusconi’s appeals of a tax-fraud conviction run out this week when a five-judge panel of Italy’s top court determines whether his sentence sticks.

The verdict in Rome, which may come as early as today, could rattle Italy’s fragile governing coalition of lawmakers loyal to 76-year-old Berlusconi and those closely allied with Prime Minister Enrico Letta. Berlusconi, who says that judges want to destroy him politically, faces a five-year ban from public office if his October conviction is upheld. He’s unlikely to get jail time.

“A definitive conviction over the near term would increase the risk of government collapse,” Peter Ceretti, a researcher with Eurasia Group in New York, wrote in a July 17 analysis. “Such an event would exacerbate tension from left and right to unprecedented levels.”

Berlusconi has weathered more than a dozen criminal trials since entering politics in 1994 and is now also appealing convictions in separate cases on paying a minor for sex and illegal use of wiretapping. In the case before the top court the self-made billionaire was found to have evaded taxes in the purchase of rights to American movies for his broadcaster, Mediaset SpA. (MS) He has denied all charges against him.

Berlusconi probably wouldn’t be incarcerated for this case, according to Andrea Castaldo, a criminal lawyer and professor at the University of Salerno. The four-year jail term handed down by the trial court may be reduced to one year due to a law against prison overcrowding. If convicted he could face alternatives such as community service or house arrest, as he would also benefit from leniency traditionally accorded to criminals over the age of 70.

Yields Rise

Italian 10-year yields have risen about 60 basis points, or 0.6 percent, since a 2 1/2-year low reached on May 2 after Letta stitched together a three-party coalition. The 46-year-old prime minister has said he is confident Berlusconi’s trials won’t affect the government.

The hearing is scheduled to start no earlier than 10 a.m. The verdict will come as soon as today and may be given tomorrow or on Aug. 1, Repubblica newspaper reported yesterday.

Berlusconi, now a senator, wouldn’t automatically lose his seat if the public-office ban went into effect. The upper house would have to vote to end his mandate, a procedure that could take months and would add to tensions in the three-month-old coalition. Berlusconi has said his legal issues won’t interfere with the government, while some of his allies have threatened to take Letta down in case of a conviction.

Coalition Fraying

The parliamentary majority is showing signs of fraying as Letta struggles to find a compromise between the tax cuts demanded by the parties in his coalition and the budget rigor required to service $2.7 trillion of debt. Letta’s Democratic Party, or PD, was thrown into partnership with the Berlusconi’s People of Liberty party, known as PDL, after inconclusive elections in February. Former Premier Mario Monti is the head of the third-biggest party in Letta’s alliance.

The charges in the Mediaset case stem from before Berlusconi entered politics. He said in a May 23 statement that he never had offshore accounts and he didn’t know about alleged bribes to a few “unfaithful” Mediaset managers, otherwise he would have stopped them. He said his “absolute innocence” will be proved.

Berlusconi’s first appeal failed on May 8 when a Milan court upheld the original conviction.

To contact the reporters on this story: Chiara Vasarri in Rome at cvasarri@bloomberg.net; Andrew Frye in Rome at afrye@bloomberg.net

To contact the editors responsible for this story: Jerrold Colten at jcolten@bloomberg.net; Craig Stirling at cstirling1@bloomberg.net


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