Berlusconi threatens fresh poll after talks break down

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HOPES for the swift formation of an Italian government were crushed yesterday when Silvio Berlusconi, leader of the right-wing alliance that won last week's elections, broke off talks with his allies after two days of bitter policy argument.

Mr Berlusconi raised the stakes in the tussle with the fractious Northern League by cancelling today's meeting called to address their demands for a federal state. He also threatened to force new elections unless the Northern League fell into line.

'We are seeing old tactics which smack of the old political order,' Mr Berlusconi told journalists summoned to a press conference at his villa near Milan. 'I believe the electorate cannot accept this sort of treachery. If there is to be betrayal, there will be neither doubt nor hesitation on my part and on that of Forza Italia. We will return to the polls to complete the process of cleansing that we started.'

Mr Berlusconi said he would wait for the President of the Republic, Oscar Luigi Scalfaro, to nominate a new prime minister before restarting talks with his allies, which also include the neo-Fascist Alleanza Nazionale. As head of the largest party, it is almost certain the media tycoon will be asked to form a government when Parliament reconvenes on Friday week.

It was a remarkable about-turn for Mr Berlusconi, who until yesterday had been assuring the nation that he was well on the way to forming a stable administration. An immediate sign of dismay came from the financial markets, where the lira plunged. Last week record rises greeted the prospect of an end to political uncertainty.

All the signs are that Mr Berlusconi has lost patience with the League's leader, Umberto Bossi, who yesterday stepped up the tirade of political invective he has been pouring on his 'ally' since the last days of the election campaign.

Mr Bossi, dubbed the Attila of Italian politics, accused 'Berluskaiser' of endangering democracy. After the talks broke down, he said Mr Berlusconi had 'lost his rag. It's the reaction of someone used to having everything his own way.'