Berlusconi stirs trouble in Italy, again

PDL is one of the largest parties in the coalition government run by Social-Democrat Prime Mnister Enrico Letta.

Faced with PDL's political pressure, the supreme court had to issue a statement defending its decision to hear Berlusconi's appeal on 30 July against a tax fraud conviction, instead of late 2013 as was initially planned.

The court said it was forced to call a special meeting in July because Berlusconi's case would otherwise expire on 1 August as it would reach the statute of limitations. Even if his conviction is upheld, he is unlikely to go to jail, as people over 75 years of age are rarely imprisoned in Italy. But he may have to give up his parliament seat and party membership.

Berlusconi's legal problems - ranging from tax evasion to abuse of office and paying for sex with an underage dancer - also caused friction in the previous government coalition, which ultimately collapsed when he withdrew his party's support.

The timing could not be worse, as ratings agency Standard&Poor's on Tuesday downgraded Italy to just two notches above "junk" - a status where countries usually have to ask for a bailout.

Downgrades matter a lot to Italy, which already has a huge foreign debt burden. The lower the rating, the higher the interest rates investors will ask when buying Italian bonds.

Last week, the International Monetary Fund warned Italy of "policy slippages" that could worsen the €2 trillion debt load and asked the European Central Bank to do more to help Italy combat its recession.