By Roberto Landucci and Barry Moody
ROME (Reuters) - Five supreme court judges on Thursday considered their verdict in Silvio Berlusconi's appeal against a tax fraud conviction that could end his 20-year domination of Italian politics and throw the government into turmoil if confirmed.
The judges of Italy's Court of Cassation retired to consider the verdict at noon (1000 GMT/6 a.m. ET) after hearing prosecution and defence arguments on Tuesday and Wednesday. The verdict was expected to take up to five hours, officials said.
Berlusconi, a 76-year-old billionaire media magnate and four times prime minister, says he has been relentlessly pursued by leftist judges trying to subvert democracy since he stormed into politics in 1994.
If he loses the case it will be his first definitive conviction in at least two dozen trials on charges that have run the gamut from tax fraud to sex with an under aged prostitute.
Some unconfirmed reports said the judges would wait for the closing of Italian financial markets before issuing a verdict because of potentially destabilizing political fallout.
Italy's politicians are on tenterhooks over a verdict that could cause a crisis in the shaky left-right coalition government of Enrico Letta and send shockwaves across the euro zone if Berlusconi is definitively convicted.
Investors have so far shown little concern, with the main barometer of market confidence, the spread between Italian 10 year bond yields and their safer German counterparts, at 277 basis points, well below levels seen during earlier crises.
That could change if the supreme court rules against him.
Berlusconi is the leader of the center-right People of Freedom (PDL) party which rules in uneasy alliance with Letta's center-left Democratic Party (PD).
Berlusconi has kept PDL hawks on a tight leash in the weeks before the trial but they have threatened a mass walkout from the government and public protests if he is convicted.
A greater threat could come from Letta's faction-ridden PD, many of whose members are unhappy with the coalition with Berlusconi and may rebel if he is convicted.
However, both President Giorgio Napolitano, who dragged the parties into a coalition in April after a two-month crisis that followed inconclusive elections, and Letta himself are adamant that Italy cannot afford more instability as the euro zone's third largest economy struggles to climb out of its worst postwar recession.
Hardline supporters of Berlusconi called off a demonstration of support outside his central Rome residence on Thursday in a sign that his party was both trying to calm the political fever around the case and avoid upsetting the supreme court judges.
He is appealing against a lower court conviction for the fraudulent purchase of broadcasting rights by his Mediaset television empire. He faces a sentence of four years in jail - commuted to one year under a 2006 amnesty - and five-year ban from public office if the court rejects his appeal.
Berlusconi's chief lawyer, eminent supreme court specialist Franco Coppi, told the judges on Wednesday that the lower courts had wrongly framed the charges against the media mogul. He said even if the offence were proved, it was a huge tax evasion scheme using legal loopholes rather than fraud. This was not a penal but a tax offence punishable by a fine, Coppi said.
Because of his age, if Berlusconi is convicted, the jail sentence would be served through community service or house arrest. Followers say he would still run his party, which he founded and bankrolls and which has no clear alternative leader.
But the power and campaigning skills which have enabled him to dominate Italian politics for 20 years, since the so-called Bribesville graft investigation wiped out the old political order, would be severely curtailed.
There is speculation that Berlusconi's oldest daughter, Marina, 46 and chairwoman of his Fininvest holding company, would become the PDL's public figurehead if he is convicted.
Both major parties may be reluctant to precipitate an election that might produce an even more chaotic result than the February vote in which the populist 5-Star Movement of comedian Beppe Grillo surged to prominence.
In any case, the political shockwaves from a guilty verdict could take weeks to have an impact. Berlusconi's peers in the upper house of parliament would be unlikely to vote to confirm any ban from office until at least September, when the parties would have to show their hand in a vote.
But the verdict could add to inertia which has prevented Letta's fractious government from passing urgently needed economic reforms.
The supreme court decision is not Berlusconi's only legal headache. He is also appealing in a lower court against a seven-year jail sentence imposed in June for abuse of office and paying for sex with Moroccan-born nightclub dancer Karima El Mahroug, alias "Ruby the Heartstealer" when she was underage.
(Writing by Barry Moody; Editing by Peter Graff)
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