Craxi's son, Bobo, himself now a Socialist politician, confirmed his father's death. The former premier's lawyer, Giannino Guiso, said in Milan that Craxi died at his seaside villa in Hammamet, Tunisia, of a heart attack.
Craxi, who served back-to-back terms as premier from August 1983 to March 1987, had been in poor health for years, suffering from heart trouble and other complications of diabetes.
In November, a Milan court ruled that Craxi could return to Italy for bypass surgery and serve his corruption sentence under house arrest. But Craxi rebuffed the chance, saying he would return only as a free man.
During his tenure as Italy's first Socialist premier of the republic established after World War II, Craxi stood up to the U.S. in 1985, refusing to hand over the Palestinian commandos who hijacked the Achille Lauro cruise ship and killed an elderly American passenger.
But Craxi also defied Italian Communists -- the largest Communist Party in the West and a big vote-getter in Italian politics -- by allowing NATO nuclear-tipped missiles to be installed in Sicily.
Among those immediately informed of his death was Pope John Paul II, who was "recalling him with prayer," said Vatican spokesman Joaquin Navarro-Valls.
The pope recognized that Craxi contributed to "the good relations between church and state in Italy," the spokesman said. Craxi updated a 1929 pact with the Vatican, which saw the end of Roman Catholicism as Italy's official religion.
"The best vacation is power," Craxi once said. Those words came back to haunt him when his Socialists, along with the Christian Democrats they ruled with in tandem in several governments, were disgraced by the probes begun by Milan's "Clean Hands" prosecutors in the early 1990s.
They eventually uncovered a well-oiled system in which businessmen filled party coffers or politicians' pockets with hundreds of millions of dollars in exchange for deals with the sprawling state economy.
He fled Italy in 1994, and a year later a Milan court declared him a fugitive from justice. Two convictions have been upheld by Italy's highest criminal appeals court, with sentences of 5-and-a-half and 4-and-a-half years in corruption cases. He was absolved in three other cases.
Throughout the scandals, Craxi maintained his innocence.
Born Benedetto Craxi in Milan on Feb. 24, 1934, the future premier was the son of a Sicilian lawyer who left the island to migrate north. Craxi dropped out of the University of Milan and dropped out of school for the world of politics.
The Italian news agency ANSA quoted his daughter Stefania as indicating he would be buried in Tunisia. "My father wil stay here in Tunisia, this is his country now."
He is also survived by his wife, Anna.
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