Italy's Monti suffers first defeat in parliament

ROME (Reuters) - Italy's technocrat government has suffered its first major defeat in parliament in a vote that revealed the strains and discontent in the political alliance sustaining Prime Minister Mario Monti as he combats a major economic crisis.

The chamber of deputies Thursday night voted 264 to 211 to pass a legal amendment which will make it possible to bring civil suits directly against magistrates for trial errors.

The amendment was opposed by Monti's three-month-old government and brought threats from magistrates to go on strike. Justice Minister Paola Severino vowed to reverse the vote when the measure comes before the Senate or upper house.

The amendment was tabled by the opposition Northern League, but supported by the centre-right PDL party of Monti's predecessor Silvio Berlusconi and a group of rebels from the centre-left Democratic Party.

The latter two groups are the backbone of the coalition keeping Monti in power and the vote demonstrated the fragility of an uncomfortable cross-party alliance. The League and PDL were allied under Berlusconi.

Although the government looks in no danger of collapse, the vote and the loud cheering that followed underlined discontent among many politicians who have been eclipsed by Monti's unelected technocrat government as it basks in wide public and European acclaim for combating Italy's debt crisis.

Monti's tough austerity measures have hit interest groups on both right and left.

The PDL is in turmoil after Berlusconi, its founder and inspiration, was toppled from power last November and replaced by Monti as Italy stared at financial disaster.

Market confidence collapsed under Berlusconi and Italy's borrowing costs rocketed to unsustainable levels, raising fears it was heading for a default which would have destroyed the euro.

TIDE TURNED

Monti's rapid approval of a painful austerity budget and pursuit of measures to reverse Italy's painfully stagnant growth appears to have turned the tide for the moment, with borrowing costs on bond markets significantly lower.

However, critics say the government demonstrated political inexperience in walking into the parliamentary ambush.

Many of the PDL's deputies hate magistrates who were repeatedly accused by the scandal-plagued Berlusconi of hounding him through the courts for political reasons in a left-wing attempt to pervert democracy.

The amendment would make judges personally responsible for damages for judicial errors instead of the state as at present.

Monti's big ace is that the politicians would be blamed for causing an economic catastrophe if they overthrew his government and he is widely expected to continue until the next scheduled elections in a year's time.

But the politicians are worried about how they will perform in that election after more than a year out of the spotlight under a technocrat government. They are already manoeuvring for position, especially within the PDL whose future remains deeply uncertain following Berlusconi's demise.

Democratic Party leader Pier Luigi Bersani denounced the vote. "Whoever voted against the government has underestimated the political issue. We are here to save Italy but we risk everything by behaving like this," he said.

Berlusconi himself seems to be concentrating on cultivating a statesmanlike image after the excesses of the past when he was accused of everything from hosting orgies with starlets and prostitutes to fraud and corruption.

"It would be irresponsible not to continue to support this government," he said Wednesday.

(Additional reporting by Paolo Biondi; Editing by Alison Williams)

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