Italian judges have ruled that former Prime Minister Silvio Berlusconi was guilty of having sex with a minor and abusing his power.
Berlusconi has been given a 7-year jail sentence, though the sentence is pending appeal. He has also been given a lifetime ban from public office. Berlusconi's lawyer said he would appeal the verdict, as expected.
Earlier, judges in a Milan court had retired to consider their verdict on Monday in a trial surrounding allegations that Berlusconi had sex with former nightclub dancer Karima El Mahroug, known as "Ruby the Heartstealer," who was then under 18. More crucially for Berlusconi's political career, he is accused of abuse of office when he intervened to get her released from police custody when she was arrested in a separate incident.
Italy's current coalition government led by center-left Prime Minister Enrico Letta depends on Berlusconi's center right party for its survival, making Monday's trial a source of tension for Italy's political scene.
Prosecutors had asked for one year in jail for paying for sex with a minor and five years and a life ban from holding public office for the abuse of power charge. Even if Berlusconi loses his appeal, the 76-year old politician may be too old for a custodial sentence and could instead be put under house arrest.
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According to Giovanni Orsina, professor of Italian history at the Luiss-Guido Carli University in Rome, the real worry for Berlusconi and the future of Italy's government isn't from Monday's ruling but from another case that Berlusconi faces over tax fraud, which could ultimately undo his political career.
"This trial has more visibility, it's more interesting than the tax trial, but ultimately the tax fraud trial will have more of a final effect," Orsina said.
"But the trial in November over tax fraud is the last appeal and if guilty, Berlusconi would be out of politics for good," he added.
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There have been a number of conflicts over tax increases and spending cuts between Prime Minister Letta's and Berlusconi's parties, most recently over a planned VAT (sales tax) rise. Berlusconi's party has demanded that the VAT increase be cancelled creating further concerns for the fragile coalition.
Tensions have not been helped by high profile, and thinly veiled, messages to the coalition partners from Berlusconi and his supporters. On Saturday for instance, Il Giornale newspaper owned by Berlusconi's brother said in a front page article that the government would fall unless Letta cancelled the sales tax increase.
Berlusconi is like "a powerful animal in a corner," Orsina, the author of a forthcoming book entitled "Berlusconism," told CNBC. But he won't try to unseat the government.
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"Berlusconi feels caged, he's in a corner, but he's also a rational animal and I don't see where he can go from here. He's not going to leave or kill the coalition government now, it wouldn't be in his interests."
Tobias Blattner, euro area economist at Daiwa Capital Markets, agreed. "He was so much in favor of the coalition from the start that it would be difficult to see him withdrawing from it, though over the last few weeks he has made threats to leave the coalition if tax increases goes ahead."
"There would be fragility and volatility if Berlusconi is found guilty, but I doubt that the government will break up... If he leaves the coalition, it will be over [coalition disputes] and nothing to do with the trial."
The underage sex trial has lasted two years and led to revelations of Berlusconi's lavish and now infamous "bunga bunga" sex parties. El Mahroug and Berlusconi deny having sex and the former leader - who is already appealing a recent court ruling convicting him of tax fraud - has repeatedly said that the Milan-based judges - all three women - are biased against him.
(Read More: Berlusconi's Love Life Lost in Translation )
Wolfango Piccoli, managing director at Teneo Intelligence, told CNBC that the impact of Berlusconi's "bunga bunga" trial was overstated and that the government , despite its "huge political deadlock,"was not at risk.
"It's certainly a fascinating story to write about, especially for the international media- in Italy we're used to this kind of behavior from Berlusconi at home. But in terms of the political repercussions on the government it's going to be minimal -it's going to create noise but it's going to be a very noisy week in Italy regardless."
"The government has to decide whether to scrap the planned VAT (sales tax) increase on Wednesday, which is one of the major requests from Berlusconi," Piccoli said.
"This is not the end of it [for Berlusconi], we've got a much more important verdict coming at the end of the year which is connected to the tax fraud case. Until then, I don't think Berlusconi is going to pull the plug on the Letta government."
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