Berlusconi denies claims that he was a victim of extortion

Mr Tarantini has admitted he paid a prostitute, Patrizia D’Addario, and other women to attend parties at Mr Berlusconi’s residences, but insists the premier didn’t know. Mr Tarantini is currently under investigation in Bari for allegedly aiding and abetting prostitution.

Mr Berlusconi has denied the payments to Mr Tarantini were due to extortion and has said he was just helping a needy family.

“I helped someone and a family with children who found themselves and continue to find themselves in very serious financial difficulty,” Mr Berlusconi was quoted as saying by Panorama, a magazine he owns. “I didn’t do anything illegal, I limited myself to helping a desperate man without asking for anything in exchange. That’s how I’m made and nothing will change that.”

A warrant was also issued for another man, Valter Lavitola, who prosecutors said was a consultant linked to defence and aerospace group Finmeccanica.

The arrests return the spotlight to a prostitution scandal which dominated headlines in 2009 when Patrizia D’Addario, an escort connected with Mr Tarantini, claimed to have been paid to attend parties at Mr Berlusconi’s private residence in Rome.

They come at a time when Mr Berlusconi’s centre-right government is struggling to tie up a revised £43.6 billion austerity package designed to reassure anxious markets about Italy’s strained public finances.

Naples prosecutors said that the arrests had been made after extensive investigations that included wiretap evidence.

“Serious and consistent indications were found of repeated payments to the Tarantini couple of sums in cash and other benefits of a financial nature by Silvio Berlusconi,” the Naples prosecutors’ office said in a statement.

The payments used “hidden or at least untransparent means” and involved the intervention of Mr Lavitola, it added. The latest case is unrelated to the so-called “Ruby affair” in which Mr Berlusconi is on trial in Milan accused of paying for sex with teenage nightclub dancer Karima El Mahroug, known as Ruby Heartstealer, when she was a minor.

Prosecutors said Mr Tarantini and Mr Lavitola, who appeared to have kept part of the money paid into front companies for himself, had acted together “to constrain Berlusconi to make further payments”.

The current investigation is focused on suspicions that Mr Tarantini lied to investigators when he told them Mr Berlusconi was unaware women brought to his parties were prostitutes.

Ms D’Addario says she slept with Mr Berlusconi at his Rome residence and tape-recorded the encounter – recordings that were later leaked to an Italian news magazine.

The conservative leader has said he has never paid anyone for sex but has made no apologies for his lifestyle. His second wife, Veronica Lario, announced in 2009 that she was divorcing him.

Mr Berlusconi has repeatedly blamed his legal woes on probes by prosecutors he contends are left-leaning sympathisers intent on ruining his political career.