By Philip Pullella
ROME (Reuters) - Former prime minister Silvio Berlusconi's weak, faction-ridden People of Freedom (PDL) party is scrambling to limit the damage from the latest corruption scandal to wash over Italy, seven months before a national election is due.
The embezzlement affair in the Lazio region, which surrounds the capital Rome, has prompted calls from the Italian president and Roman Catholic Church for an end to "shameful" behavior by the political class.
The scandal came to a head on Monday night with the resignation of Lazio regional president Renata Polverini of the centre right PDL.
Polverini said she had done no wrong but acknowledged that the scandal, which exposed infighting among PDL factions, had stripped the regional council of legitimacy.
It involved the misuse of hundreds of thousands of euros in party funds by regional assembly members to hold dinners and lavish parties, including one where participants wore togas and pig masks, and submitting receipts for reimbursement.
Franco Fiorito, PDL leader in the Lazio regional government, is being investigated by magistrates on suspicion of embezzling some 800,000 euros.
Since Monday's resignation of the assembly, which was dominated by PDL members, national party leaders from Berlusconi on down have announced measures to control party financing.
Writing in his blog on Tuesday, Berlusconi called for changes in the current system of public financing of political parties and external auditors to certify the books of parties.
National PDL secretary Angelino Alfano said party accounts would eventually be posted on line.
But political commentator Massimo Franco, writing in Wednesday's Corriere della Sera, called the latest moves by Berlusconi and other PDL leaders "an act of desperation".
"Finding itself with a regional government in tatters just a few months before the elections only gives credence to those who say the PDL is on the verge of implosion," Franco wrote.
Italy goes to the polls, probably in April, to elect a new government to succeed that led by Prime Minister Mario Monti, a technocrat with no political affiliation who has held office since Berlusconi resigned last November.
Monti on Tuesday repeated that he does not intend to run for office, saying that normal politics must resume its course in Italy, "hopefully with a higher degree of responsibility and maturity".
Many leading business, banking and academic leaders have urged Monti to run for office because they see him as the only credible person to continue to address the financial problems of the country with the third-largest economy in the euro zone.
Berlusconi has still not decided if he will run for office.
But the turmoil in Lazio has served to compound the political uncertainty before the elections, with several other regional governments also mired in financial scandals.
Opinion polls taken before the Lazio scandal show the PDL trailing the centre-left Democratic Party by at least six points, a margin now expected to grow.
Commentators also say that now the Lazio regional government has been felled, Lombardy, another region governed by the centre right and plagued by scandal, may be next.
Lombardy governor Roberto Formigoni, a Berlusconi ally, is being investigated on suspicion of accepting some 8.5 million euros in bribes, including trips and dinners, paid by businessmen allegedly to help secure favorable deals.
He denies wrongdoing and has refused to resign.
"The knock-on effect (of the Lazio scandal) will be devastating. Formigoni and Lombardy are wobbling and probably will be the next to go," said James Walston, professor of political science at the American University of Rome.
Other centre right-led regional governments at risk of political collapse because of financial scandals include those of Campania, around Naples, and Calabria in the deep south.
(Reporting By Philip Pullella; Editing by Angus MacSwan)
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