With a parliamentary revolt looming over the measure and Milan's ?lite pool of "Clean Hands" magistrates announcing they would leave their posts, the media tycoon-turned-politician said the aim was to stop Italy from becoming a police state.
"Preventive detention must go back to being an exceptional measure," Berlusconi told a stormy news conference, which he left without taking questions.
He said imprisonment had become almost the rule, adding that Italy "had to remain a state of law. It has got to be stopped from becoming a police state."
The cabinet decree, passed Wednesday, removes bribery and corruption from among offenses for which suspects can be held in jail in preventive detention. Corruption suspects will remain subject to possible house arrest.
Custody has been a key tool in the two-year assault by magistrates in the Tangentopoli scandal that buried Italy's disgraced political old guard and helped propel Berlusconi to triumph in general elections last March.
Targets of the instrument have included Berlusconi's own brother, Paolo, who was briefly jailed before the elections.
Widely quoted estimates are that some 2,000 corruption suspects, including former Health Minister Francesco De Lorenzo and a clutch of ex-parliamentarians, could be let out of jail as a consequence of the decree.
Berlusconi acknowledged that the service magistrates had performed but said they had begun to act like stars.
"They're disappointed if their names and faces don't appear in newspapers and on television," Berlusconi said.
Milan magistrate Antonio Di Pietro, a national hero, and three colleagues said Thursday they would ask to be assigned to other investigations. The city's judicial chief Friday said he had not yet received a formal request.
The crisis, which hit both the lira and government bonds, is the first real challenge of Berlusconi's two-month-old "Freedom Alliance" coalition.
Two key coalition partners, the federalist Northern League and the neo-fascist-led National Alliance, both said they would work to amend the decree in parliament. Justice Minister Alfredo Biondi said the decree remains in force only for 60 days unless approved by parliament.
"We cannot agree to put the battles waged against corruption ... aside to remain in government," Interior Minister Roberto Maroni of the League told reporters. "The government has given the impression that it wants to protect its friends. That is not so. At least it wasn't my intention nor the intention of almost all the members of the cabinet," he said.
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