Italian Prime Minister Silvio Berlusconi, fighting a possible trial for sex with an under-age prostitute, faces another threat this week with a showdown over local tax that could further damage his struggling government.

The 74-year-old premier has resisted calls to resign over a sex scandal that has dominated headlines and made a household name out of Ruby, the teenaged nightclub dancer he is alleged to have paid for sex while she was under the legal age. He denies it.

Less spectacular, but potentially just as serious for the future of the government is a standoff over proposed tax changes that are part of regional tax reforms close to the heart of Berlusconi's coalition partners in the Northern League.

The reforms, intended to give more tax and spending powers to local governments, are the central goal of the League, which has promised a deal to its supporters in the prosperous cities and regions of the north.

The package includes a transfer of 2 percent of income tax to local councils, changes rules on rental and real estate tax and garbage collection and exemplifies the League's battle to wrest power from Rome.

Roberto Maroni, the powerful Northern League interior minister, said this week that if the measures are not approved by a parliamentary commission on Thursday, the party should push for an election straight away.

Not all of Maroni's party colleagues agree and if the opposition succeeds in blocking the measure in the commission, it can be brought to a full vote in the lower house where it is more likely to be approved.

However any problems with the package would be a serious blow to the government and would heighten the prospect of an election in the next few months.


Berlusconi has had problems winning back control of the political agenda since scraping through a no-confidence vote on December 14.

On Monday, he announced a plan to cut red tape, boost the poor south of Italy and help business as part of a programme aimed at tripling economic growth within five years.

But the initiative risks being drowned in the welter of legal problems he faces, which have grown more acute since the constitutional court last month struck down central parts of a law which gave him automatic immunity from trial.

Magistrates have continued to question witnesses to the parties at Berlusconi's private villa near Milan and are expected to apply this week for an order to bring the case to court immediately.

On the same day as the local tax decision on Thursday, the lower chamber is also expected to vote on whether to authorise magistrates to search the offices of Berlusconi's accountant Giuseppe Spinelli.

Spinelli is suspected of handling payments to the varied cast of young women prosecutors say received bundles of cash and jewellery and, in some cases, free housing from Berlusconi.

While the result of the vote may be more symbolic than practical, it may be a sign of whether the Ruby scandal has weakened the government's already fragile hold on parliament.

On Thursday, things will be in the balance, the daily Corriere della Sera said in an editorial.

We'll understand then whether we're watching the umpeenth attempt to shoulder him aside is blocked by the numbers or whether we are approaching the end point, it said.