Berlusconi and rivals dig in ahead of crucial vote

ROME (Reuters) - Italian Prime Minister Silvio Berlusconi will not resign before next week's confidence vote as his rivals want, an aide said on Thursday, playing down reports of behind-the-scenes negotiations between the two camps.

Berlusconi faces a no-confidence motion on December 14 which would sink his government if he lost, and possibly lead to early elections next spring.

The 74-year-old prime minister, a media billionaire, no longer enjoys a built-in majority in parliament since Gianfranco Fini, the lower house speaker and co-founder of his People of Freedom party, broke with him over a string of scandals.

Fini and his supporters say Berlusconi must resign or they will vote with the opposition against him next Tuesday and force him to step down.

Berlusconi, who has been busy luring opposition lawmakers to his camp, says he is confident he can defeat the censure motion and call Fini's bluff.

With only five days to go, the exact balance of power in parliament is far from clear, and political manoeuvring between the two sides is further clouding the picture.

Financial markets, used to political instability in the euro zone's highly indebted third largest economy, have so far been largely unmoved by the latest turmoil.

In what was regarded as a concession to Berlusconi, Fini's chief lieutenant Italo Bocchino said on Wednesday that if the premier agreed to step down before December 14, Fini would back his reappointment at the helm of a new government "within 72 hours."

Berlusconi's spokesman, however, said the premier had no intention of giving in to Fini's demands, and was sarcastic about reports of secret negotiations between the two sides to find a way out of the impasse.

"What is certain is that there will be no resignation," Paolo Bonaiuti told reporters. "As for the thousands of streams of negotiations that may or may not be taking place, I have no idea how they are going."

Bocchino also dismissed the idea, saying that "no advanced negotiations are under way."

EARLY ELECTIONS?

With no sign of a compromise in sight, Italian media are citing vote counts that give either side a razor-thin advantage.

The uncertainty is such that the state of health of three pregnant MPs, two from Fini's new movement and one from the opposition, is being closely monitored as their absence on the day of the vote could tip the balance in Berlusconi's favour.

If Berlusconi, weakened by scandals over his financial interests and personal life, lost next Tuesday's vote, he would be forced to resign. But even if he narrowly won, he would remain vulnerable to the whims of his rivals every time legislation has to be voted by parliament.

Analysts say some sort of agreement between the two camps may be the only way to avoid snap polls, which surveys say may not produce a clear-cut majority in both houses of parliament.

But the wiggle room for a deal appears slim.

"There have been very bitter and strong words that have been exchanged, on a personal but also on a politically substantial level," said James Walston, political science professor at the American University in Rome, who reckons early elections are the most likely scenario.

The political crisis is complicated by the euro zone debt turmoil, with some commentators warning that a protracted period of uncertainty is the last thing the country needs now.

Italy has so far largely escaped the worst of the crisis that engulfed Greece and Ireland, despite its huge public debt.

But with the crisis spreading, the premium investors demand to hold Italian bonds instead of German benchmark debt rose to a euro lifetime high last week.

(editing by Paul Taylor)