Defiant Silvio Berlusconi vows to stay on

ITALIAN prime minister Silvio Berlusconi yesterday said it would be "folly" for him to quit two years ahead of term, warning that political instability would leave the country prey to financial speculators.

Hours after winning a confidence vote, he told parliamentarians that it was important the government remain in power until its five-year term ends in 2013 to "avoid ending up like other European countries which are bleeding".

Mr Berlusconi clinched a morale-boosting win in the lower Chamber of Deputies earlier yesterday in a vote tied to legislation.

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It was the first parliamentary test of his staying power since two stinging defeats at the polls for his conservative party and his government's policies in the past few weeks.

The billionaire media mogul, in his third year in office, also contended in a pitch to the Senate for continued support that there was no alternative to his partnership with coalition ally the Northern League, which opposes Italy's involvement in Nato's operations in Libya.

He defended the Nato mission in Libya, saying "up to now it has saved thousands of lives", although he said the government will ponder its strategy on the mission in a high-level meeting of Italian defence officials expected next month.

The premier is due to make a similar pitch today in the lower Chamber of Deputies, where he won a confidence vote tied to a development funding law to close ranks among majority lawmakers and speed up passage.

Mr Berlusconi dangled the spectre of financial disaster, like that rocking Greece now, if he were to step down. Stepping down now with no other leader poised to replace him would be "folly", the prime minister said.

So far, Italy - despite its laggard economy and high public debt - has escaped financial debacle. However, last week Moody's ratings agency warned that it might reduce the nation's credit rating. Earlier, Standard and Poor's cut its rating outlook for Italy's debt from stable to negative.

"The ratings agencies have us under observation, and the locusts of speculation are only waiting for the occasion to take the prey that shows signs of weakness," Mr Berlusconi told the senators.

President Giorgio Napolitano had asked the government to lay out plans to parliament to see if it still commands enough support to govern effectively.

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Mr Berlusconi's coalition has been weakened in the past year by the defection of an important ally, leaving the Northern League with its often fickle leader Umberto Bossi the lynchpin keeping the government going.

The premier defended his reliance on Bossi, telling the lawmakers the League is "the only political asset that will guarantee stability".

To placate the League, Berlusconi promised to propose reforms to streamline and lower taxes this summer.The anti-immigrant League stepped up calls for Italy to end its participation in Nato's campaign in Libya because it fears more refugees will reach Italy.

Voters in referendums earlier this month rejected several key laws pushed by Berlusconi's government, including one reviving nuclear energy.

In his speech, Mr Berlusconi didn't directly mention the defeat on the nuclear policy. Instead, he said that the country could lower its energy bills and dependence by exploring alternative forms of energy.

In the confidence vote on a development bill, the government won by a majority of 317-293 in the Chamber of Deputies.

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