By Deepa Babington
ROME (Reuters) - Italy's Prime Minister Silvio Berlusconi risks losing his northern power base of Milan to the left for the first time in two decades after local elections that have shown just how fragile his center-right coalition is.
Around 6 million Italians are eligible to vote in mayoral contests in 90 towns and six provinces on Monday, but the focus is squarely on the main battlegrounds in the financial capital Milan and the southern port of Naples.
Voting began at 7 a.m. (0500 GMT) on Monday with results expected in the evening after the polls close at 1300 GMT.
With the government preparing to bring forward plans to slash the budget deficit by some 40 billion euros ($57 billion) after ratings agency Standard and Poor's cut its outlook for Italy's A+ rating to "negative" from "stable," the stakes are high.
Defeat in his hometown of Milan would be a serious blow for a premier already weakened by a series of sex scandals, corruption trials and a sluggish economy and could call into question his government's ability to push through painful cuts.
Despite mountainous public debt of about 120 percent of gross domestic product, Italy has largely avoided the financial market turmoil seen in Greece and Portugal but the S&P warning earlier this month was a reminder of the price of inaction.
"This is the real dilemma. Will the current government be able to manage it?" business daily Il Sole 24 Ore asked in an editorial on Monday.
Berlusconi suffered a drubbing in the first round of voting on May 15 and 16, when an uninspired center left easily held on to power in Turin and Bologna and forced the center right into run-offs in Naples and Milan, its longtime stronghold.
A loss would almost certainly deepen a rift with his main ally, the Northern League, and could provoke challenges to his otherwise unquestioned leadership of the center right, although senior ministers have ruled out any change of course before the next national elections in 2013.
"I don't see any possibility of an alternative government. And I don't think anyone wants early elections," Defense Minister Ignazio La Russa, one of Berlusconi's most faithful lieutenants, told daily newspaper La Stampa.
In Milan, where Berlusconi made his business fortune and launched his political career, outgoing center-right mayor Letizia Moratti trailed with 41.6 percent of the first-round vote against leftist Giuliano Pisapia's 48 percent.
"I have seen the climate is changing, Milan is really changing," Milan resident Cinzia Zarotti said after she cast her vote on Monday.
Regional issues including transport and the chronic garbage crisis in Naples have weighed on voters' choices but the flailing national economy has overshadowed the polls.
Italy has been one of the euro zone's most sluggish economies for over a decade, with more than a quarter of its youth unemployed and the average Italian poorer than he or she was 10 years ago.
Berlusconi's government last month was forced to trim its growth forecast for the year to 1.1 percent from 1.3 percent and cut next year's outlook to 1.3 percent from 2.0 percent.
S&P's lowered its outlook on Italy for failing to cut its debt and boost growth, although worries of an immediate impact on the markets eased after the Treasury sold long-term bonds near the top of its target range on Monday.
After being punished for initially characterizing the vote as a referendum on his popularity and policies, Berlusconi has since blanketed the airwaves with trademark tirades against his longtime enemies: the left and "communist" magistrates.
Milan will become an "Islamic gypsyland" if the left wins, he predicted. Leftist voters lacked a brain anyway, he said, prompting Internet spoofs and a lawsuit from an offended voter.
A rant against Italian magistrates to a surprised U.S. President Barack Obama at the Group of Eight summit in Deauville, France prompted Economy Undersecretary Daniela Melchiorre, a former magistrate, to resign in protest.
(Additional reporting by Roberto Rossi in Milan; Editing by Louise Ireland and Philippa Fletcher)