ITALY’S PRIME MINISTER Silvio Berlusconi is bracing for a confidence vote this week that will determine his political future amid a rebellion by some allies and growing discontent with his leadership at a time of financial crisis.

Small anti-Berlusconi demonstrations erupted Wednesday in Rome, Naples and other cities in a sign the anger is spreading beyond Italy’s bickering politicians to ordinary citizens.

Berlusconi will address parliament Thursday and likely defend his government’s record and relaunch its legislative agenda. The vote of confidence is expected Friday, said Fabrizio Cicchitto, a parliamentary whip for the governing party.

If he loses, Berlusconi would be forced to resign.

Berlusconi, a media tycoon, has been weakened by sex scandals, defections from his coalition and legal problems. He faces separate trials in Milan on charges of corruption, tax fraud and – in the most sensational case – paying for sex with a minor. He denies wrongdoing, claiming that he is the victim of politically-driven magistrates who want to oust him from power.

The government’s rifts – including between Berlusconi and his powerful finance minister, Giulio Tremonti – have been exposed for weeks over austerity measures necessary to balance Italy’s budget and avoid contagion from Greece’s debt crisis. The government has modified the measures several times and drawn criticism for its lack of clear direction.

Acute tensions

In a blunt message Wednesday, President Giorgio Napolitano demanded “credible answers” from the Cabinet and parliament alike, pointing to “the undeniable display of acute tensions within the government and the coalition.” It was an unusual step from a highly respected and largely ceremonial figure – and one that added pressure on Berlusconi.

The 75-year-old premier has dismissed any calls for his resignation and vowed to serve out his five-year mandate, which expires in 2013.

But his support in parliament has eroded.

He suffered an embarrassing defeat Tuesday when a routine piece of legislation failed to pass the lower house by a single vote. Tremonti had missed the voting by a few seconds, but insisted later there was no political motive in his absence.

In a sign of his displeasure over the failed vote, Napolitano reminded Berlusconi that it was up to him alone to “indicate the solutions that will lead to the necessary approval” of the annual state balance sheet.

Berlusconi’s allies have dismissed Tuesday’s defeat as a freak incident, saying the confidence vote will show the government still enjoy the parliament’s support.

But recently, Berlusconi has faced open criticism and a rebellion from some longtime members of his party, including two former ministers, who have expressed disappointment over the government. And long-time ally Umberto Bossi of the Northern League has suggested that Berlusconi’s government would not complete its mandate.

Corrupted

Many Italians who took to the streets Wednesday sang the national anthem and yelled slogans against “the caste” – a term that has taken on the pejorative meaning of a corrupted, power hungry political class.

The political turmoil comes as Italy is trying to resist being engulfed in Europe’s debt crisis. Last week, the Fitch ratings agency downgraded Italy’s sovereign credit rating, after downgrades from Moody’s and Standard & Poors, which have all cited Italy’s anemic growth and high public debt.

Italian Central Bank chief Mario Draghi, who takes over the helm of the European Central Bank on November 1, urged the government Wednesday to act more quickly to implement reforms that can spur growth – beyond the austerity package that put Italy on the path to balance its budget by 2013.

Otherwise, Draghi warned that the rising cost of borrowing to service national debt seen over the last three months will eat up “no small part” of the austerity package approved by Parliament last month.

“The goal of relaunching growth is finally largely shared, but the adoption of the measures necessary so far have banged up against apparently insurmountable difficulties,” Draghi said in a speech.