By Naomi O'Leary
ROME, Aug 4 (Reuters) - Tensions in Italy's squabbling coalition heightened ahead of a rally by supporters of Silvio Berlusconi in Rome on Sunday in protest at a tax fraud conviction that threatens his future in politics and the fragile government.
Berlusconi's centre-right People of Freedom (PDL) party called the rally outside his palace in central Rome to protest the jail sentence, which has shaken the already fraught coalition with traditional rivals, the centre-left Democratic Party (PD).
The strife has further dimmed hopes for reforms to drag the euro zone's third largest economy out of its longest post-war recession, the aim of Prime Minister Enrico Letta when he formed the government three months ago.
Defence minister Mario Mauro told online newspaper Il Sussidario there was an awareness within the government that the delicate coalition risked breakdown.
"The factor that determines whether the coalition can prevail or not is whether the conditions exist to pass reforms," said Mauro, who belongs to the centrist Civic Choice movement, adding that if the coalition were to fall, "one option would be early elections".
However, there is little expectation of an immediate government crisis as parliament prepares to go into recess and millions of Italians head off for their sacrosanct August summer holidays.
Berlusconi also has reason to support the government for now, as he cannot begin to serve his sentence while he remains a member of the Senate and the verdict may exclude him from running as a candidate if an election is called.
On Friday he called on his party to push for a reform of the justice system, which he maintains convicted him because of political bias.
His allies reacted with fury to the conviction, with one senior party figure saying the verdict "risks a sort of civil war".
The PDL has been lobbying hard for President Giorgio Napolitano to pardon Berlusconi, an idea the president has rejected in the past and which some legal experts say would be impossible as Berlusconi is still awaiting a verdict in an appeal against a conviction for paying for sex with a minor.
But one of Berlusconi's most loyal allies, PDL deputy Daniela Santanche, threatened a mass resignation of centre-right lawmakers unless Napolitano issued a pardon, which she said was Berlusconi's right.
"We are in a dictatorship. There is a power that has overruled democracy (the judiciary)," Santanche told daily Il Fatto Quotidiano.
"Berlusconi's conviction deserves a revolution."
(Reporting by Naomi O'Leary; editing by Andrew Roche)
? 2011 Reuters
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