The recent ruling by Italy's Constitutional Court is a huge setback for Prime Minister Silvio Berlusconi and could lead to a degree of political instability in the country.

The court annulled a law passed by the Berlusconi government which gave the Prime Minister and three other state officials - the President and the two parliamentary presidents - immunity from prosecution while in office.

The court's decision means Berlusconi may now have to stand trial in a number of cases involving allegations of corruption, bribery and tax evasion. It has certainly been a difficult year for the Italian Prime Minister who was entangled in a series of allegations about his personal life, which he survived; but he will not be able to brush aside this latest development, even though his reaction to the court ruling was one of defiance.

Berlusconi has refused to resign as a result of the court's judgement and once again accused the Constitutional Court of harbouring an agenda to destroy him and of being riddled with Communists and left-wingers.

While it is true that the Italian judiciary tends to be left-wing in outlook and is not as politically independent as its counterparts in other European countries, it is hard to disagree with the decision, which basically rules that no one is above the law, no matter how rich or famous they may be. So, in a nutshell, the Italian Constitutional Court has arrived at the right conclusion.

Berlusconi will now have to spend time defending himself in court, which could damage his ability to govern and which could prove to be a major distraction from his responsibilities. This situation is far from ideal and Italy's international image and reputation will suffer. It is hard to understand how a serving Prime Minister can do his job properly while at the same time stand trial over such serious allegations.

Berlusconi's political career is not over, because the Italian judicial system tends to be weak and any trial involving a Prime Minister - if it does come to that - would probably drag on for quite some time.

Furthermore, Berlusconi's parliamentary majority seems to be intact, for now, and his coalition firmly behind him. Umberto Bossi, leader of the Northern League, which rules in partnership with Berlusconi's People of Liberty party, said after a meeting with the Prime Minister: "I found him strong and that pleased me. I found him resolved to fight."

Also, the centre-left opposition still seems to be in a state of disarray and has not gained much political capital from this latest crisis.

Still, Berlusconi has been weakened and one wonders how long his party as well as his coalition partners will remain loyal to him if a trial drags on and on, damaging Italy's reputation in the process. True, the Prime Minister is still popular with the electorate and his approval ratings are still high - he has brought political stability to Italy and is credited with getting things done - but things could easily change if a trial gets underway.

Berlusconi has made it clear that he is ready for a fight. Soon after the Constitutional Court's ruling, he stated: "We have a very organised minority of red magistrates who use justice for a political fight. We must govern for five years with or without the law."

The Prime Minister also criticised President Giorgio Napolitano who had said the Constitution must be respected, saying he was not interested in Napolitano's views.

Such comments might even have gone a bit too far for some people within Berlusconi's own party. Gianfranco Fini, president of the lower House of Parliament, co-founder of the People of Liberty party, and a possible successor to the Prime Minister, remarked that Berlusconi's right to stay in office "cannot substitute his duty to respect the Constitutional Court and the head of state". Such a comment by Fini could be evidence of the first signs of dissent within the ruling party.

Some analysts believe Berlusconi's fight with the courts and the President might mean there will be little appetite for further reform within the government. "They have not achieved much in reforms. Now they will do less," Massimiliano Marcellino, head of economics at the European University Institute in Florence commented last week.

This latest crisis could also mean that a weakened Prime Minister might feel he has to give in to further demands by his coalition partner, the Northern League, which is always clamouring for more autonomy for the regions. Such a direction could cause friction within Berlusconi's party, where certain elements oppose any further devolution within Italy.

This latest development is something Italy can do without. Its structural economic problems and need for reform require a government that is clearly focused and not constantly at odds with the country's judiciary and President.

Italy certainly cannot afford to have its Prime Minister put on trial. Perhaps the time has come for Berlusconi's own party to start seriously looking for a new leader.