By Paolo Biondi, Giselda Vagnoni and James Mackenzie
ROME (Reuters) - When Silvio Berlusconi set out to end Italy's government last month, he didn't consult the national secretary of his People of Freedom Party. Nor was the party's secretary Angelino Alfano asked whether he wanted to resign as deputy prime minister of the coalition government; he was told to.
This government "is up to no good. It only wants to raise taxes," a Berlusconi aide told Alfano by phone on the Saturday afternoon of September 28, according to a person close to the deputy premier. The aide said Alfano and the four other ministers of Berlusconi's People of Freedom Party (PDL) had to step down immediately.
Alfano, who declined to comment for this article, did resign, jolting financial markets and reviving memories of the moment in 2011 when Italy almost succumbed to the euro zone debt crisis. But the phone call also triggered a mutiny among Berlusconi's most senior lieutenants that thwarted his attempt to topple the government.
Coupled with a likely ouster from parliament after a criminal conviction, the rebellion has left the 77-year-old Berlusconi facing the most serious challenge to his authority in 20 years and is pushing Italy's most dominant post-war leader into the sunset of his career, friends and colleagues say.
"Berlusconi thought his people would stand up for him. But they didn't," Umberto Bossi, leader of the separatist Northern League party said in an interview. Bossi said it's too early to write Berlusconi off. But he added that his longtime friend and former political ally is "not what he was before."
The revolt - the details of which Reuters has pieced together after interviews with two dozen politicians and aides who were directly involved - is now giving rise to what many say is a long overdue power struggle for the future of Italy's conservative forces. For Alfano - a 42 year-old Sicilian lawyer who was long been Berlusconi's anointed successor, but who few considered strong enough to lead the party - the coup is a chance to set his own stamp on a new conservative political group.
Whether Alfano will succeed is by no means certain. He has neither Berlusconi's millions nor his proven electoral appeal, shown most recently in February's elections, when the media mogul converted what looked at one point like a likely wipeout into a share of government.
Yet Berlusconi himself is worried about his future, people close to him say. For his tax fraud conviction, he faces a year of house arrest or community service and once out of parliament, he loses legal immunity and could be arrested at any time. Berlusconi declined to comment for this article.
For the first time in many years, the PDL also faces a potentially formidable opponent - Matteo Renzi, the 38-year-old mayor of Florence who is bidding to head Italy's center-left Democratic Party and whose popular appeal and communication skills rival Berlusconi's.
During a recent lunch of mushroom crepes and Baba dessert with PDL politicians, Berlusconi recounted a warning he had received from Russian President Vladimir Putin, a longtime friend of the former Italian premier. "You will end up like Tymoschenko," Putin said, according to a person present, referring to jailed Ukrainian opposition figure Yulia Tymoshenko.
Since Berlusconi created his Forza Italia party, as it was originally named, in 1994, the movement has never developed a strong alternative leadership to challenge its founder.
Earlier this year, Berlusconi's sway with Italy's conservative electorate was reasserted when the PDL gained far more votes than expected in the February elections. It was a strong enough showing to force Italy's centre-left Democratic Party, the winners, to have to share power with the PDL in the awkward coalition government led by Prime Minister Enrico Letta.
The makeup of the alliance - formed last April - sowed the seeds of the crisis that rocked Italy last month. By the summer, Berlusconi fretted that his conservative party might face a backlash for being part of a government that needed to keep Italy's finances in check, in part by raising taxes. Party hawks had been urging him to pull the plug and go to elections.
Then, in August, the tax fraud conviction left Berlusconi vulnerable to being ousted from parliament.
After the ruling, the PDL stood united behind Berlusconi in public. But in private, the conviction created a rift within the party. Loyalists who felt their future political careers depended on Berlusconi circled more tightly around their former premier, joining the hawks who were agitating to fell the coalition government, insiders say.
Those who felt they had a political future in a conservative party even without Berlusconi took a more sanguine attitude and became so-called doves, more reluctant to criticize the coalition government, the insiders add.
Berlusconi himself became increasingly impervious to warnings that Italy could not afford a government collapse with its economy in deep recession and financial markets on alert for any sign of weakness, people close to him say.
On the Saturday afternoon of September 28, Berlusconi told several aides that he wanted to end the government because he was angry about a planned increase in Italy's sales tax. But according to several people close to both Alfano and Berlusconi, the underlying reason was the tax fraud conviction.
Alfano shared Berlusconi's belief that leftist opponents were exploiting the tax conviction to end Berlusconi's political future once and for all, according to these people. But Alfano didn't feel this was enough reason to bring down the government. Opinion polls were showing little appetite for an election. When Alfano received the call from Niccolo Ghedini, Berlusconi's longtime lawyer who is also a PDL senator, telling him to resign, Alfano felt his mentor was hanging him out to dry.
"Before then, Alfano always felt that he was Berlusconi's successor. But this time, he felt his position was in danger. It was a question of his own survival," said a person close to Alfano.
Alfano quickly arranged a meeting at his house with other PDL ministers. They decided to comply with Berlusconi's order to resign, as a show of loyalty to the party founder, according to people with knowledge of the meeting. But they also planned to let the public know that they were not happy about it.
The ministers' resignation meant the government no longer had the support of one of its two key parties and hence was essentially dead. Letta, who had just returned from a trip to New York, would have to call a confidence vote in parliament to ascertain whether there was any chance his government could proceed.
But by Sunday and Monday, it was clear the PDL was on thin ice too. Alfano himself issued a statement saying he was "diversamente Berlusconiano," or "a different kind of Berlusconian" - a way of distancing him from party hawks like Ghedini.
By late Monday, some 20 senators had rallied around Alfano and decided they were going to defect and vote in favor of the Letta government during the confidence vote, according to people involved in the discussions. That would be enough to tip the balance in the upper house, where the decisive showdown would take place.
For two days Berlusconi wavered, torn between the defectors and hardliners, according to people close to the premier. On Wednesday morning, just as he entered parliament, the former premier realized he could not stop Letta from winning the vote. His goal became to try to hold the party together, they added.
As the debate wound up, Berlusconi stood up in the Senate and announced that "not without some internal strife", he would support the government. Amid a mix of applause and jeers, Berlusconi sat down and put his face in his hands.
"It was an absolute shock. We were told 5 minutes before," that Berlusconi had decided to support Letta, said an aide to one of the most senior PDL figures.
Today, the party hierarchy is doing its best to suppress any signs of division. The PDL's parliamentary whip sent out a letter to all lawmakers this week with clear instructions: "There are different visions for the future but there is one certainty for everyone - the charismatic leadership of Silvio Berlusconi, whose order to remain united should be followed without ifs and buts."
Many in the PDL believe Berlusconi and Alfano will try to patch things up in order to keep the party together. Yet others within the party are agitating for a change in leadership. Former Regional Affairs Minister Raffaele Fitto and the mayor of Verona Flavio Tosi have both indicated they are ready to challenge Alfano to take over the centre right. Marina Berlusconi, the former prime minister's 47-year old daughter is also a possible successor if she decides to enter politics, people close to the former premier say.
Fresh from the coup, Alfano now has the best chance to win over a party long used to its domineering leader, friends and colleagues say. But it won't be without further internal struggles, insiders say.
"If things head towards replacing Berlusconi with Alfano," said one ministerial aide involved in the discussions within the PDL, "it will be a revolution."
(Reporting by Paolo Biondi, Giselda Vagnoni and James Mackenzie. Editing By Alessandra Galloni and Janet McBride)