Snap analysis - Italy's Berlusconi gambles on confidence vote

ROME (Reuters) - Italian Prime Minister Silvio Berlusconi is risking a showdown with rebels in his coalition because he would rather take the country to an early election he could win than be worn down by internal dissent.

Fabrizio Cicchitto, head of the parliamentary group of the ruling People of Freedom party and one of Berlusconi's most trusted lieutenants, said on Friday there would be a make-or-break confidence vote in September.

The vote would be on a platform based on few points and the only alternative if Berlusconi lost would be an election.

The announcement underscores Berlusconi's impatience after his grip on power was greatly weakened by last week's split with key former ally Gianfranco Fini, indicating he is in no mood for compromise and is not afraid to go back to the ballot box.

The 73-year-old premier is at his best on the election trail, and his gamble is that -- despite a fall in his popularity ratings and a string of corruption scandals hanging over the government -- he would still likely win a snap vote.

"Berlusconi would rather go for an election than suffer what he fears would be death from a thousand cuts," said David Lea, a Western Europe analyst with Control Risks.

"In his own mind, he is a streetfighter and would see an election as just the opportunity he needs to rebuild his support base ... The opposition is in disarray and really not ready for an election," he said.

Fini, the lower house speaker and co-founder of Berlusconi's People of Freedom (PDL) party, has 34 supporters in the lower house, enough to strip Berlusconi of his majority. In the Senate, the government's majority has been cut to less than a handful of votes.

The new balance of power in parliament became clear this week, when Fini's camp abstained to let a junior minister survive a no-confidence motion, but showed it had enough votes to bring the government down if it chose to do so.

By seeking a new confidence vote as early as next month, when parliament gets back to work after the summer break, Berlusconi is raising the stakes and forcing dissenters to toe his line or take responsibility for a government collapse.

The premier may also be fearing that without a quick fix, a prolonged period of political instability could bring unwelcome attention from financial markets that so far have been largely satisfied with the government's budget discipline.

Italy has more than 130 billion euros worth of debt to roll over by the year-end, and some economists say it may need extra austerity measures in the next few months to shore up its public finances -- particularly if the turmoil continues.

PRESIDENT'S ROLE

If Berlusconi lost the confidence vote, his government would have to resign. But it is up to President Giorgio Napolitano, a former communist whose relations with Berlusconi are patchy at best, to dissolve parliament and call a snap election.

Tradition is against Berlusconi -- Italy has never held an election in the fall or winter before.

If the government fell, Napolitano is likely to prefer to try to identify another parliamentary majority as the basis for an interim government until regular elections due in 2013.

Berlusconi and the Northern League oppose this option, even if one of the names circulating as possible leader of an interim government is that of Economy Minister Giulio Tremonti.

Most of the centre left opposition, which is also divided, back the idea of a broadly-based interim administration which would give them more time to prepare for an election.

But what will happen in the September vote?

Fini has said his allies will stand by the government every time it sticks to its electoral manifesto, but will fight any proposal it deems unfair -- so the content of the platform Berlusconi intends to present next month is crucial.

Italian newspapers said it would include reform of the justice system, taxes, devolution of taxation and spending power to regions and an economic programme for Italy's poorer south.

Fini, whose power base is in the south, has long called for stimulus measures to help growth there but is more critical of any plans for fiscal federalism -- a pet project of the Northern League, which is now Berlusconi's main coalition ally.

He has also hammered away at the themes of legality and morality, so reform of the judiciary is also likely to prove a bone of contention.

Yet Fini too has little to gain from an early election and he may decide, as he has this week, that it is too early to pull the plug on the government just yet.