ROME, July 4 (Reuters) - Champions Juventus should be relegated to the third division and three other top clubs thrown out of Italian soccer's top league, the prosecutor in a sports match-fixing trial said on Tuesday.

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Stefano Palazzi told the tribunal that AC Milan, Lazio and Fiorentina should be despatched to Italy's second division, Serie B, and Juve also stripped of the Serie A titles they won in the last two seasons.

The prosecutor's demands are more severe than expected and came just hours before Italy were due to play World Cup hosts Germany in the semi-final in Dortmund at 9.00 p.m. (1900 GMT).

Juve are at the centre of Italy's biggest sporting trial after phone taps revealed one of its top managers discussing referee appointments with officials. Palazzi said Juventus should be relegated to 'below Serie B'.

The prospect of Italy's most successful team plummeting into the also-rans of soccer sent a shiver through investors and the Milan stock exchange suspended Juve's shares.

In another blow, Juventus said coach Fabio Capello had resigned. Real Madrid president Ramon Calderon said on Monday he would appoint Capello, one of Italian soccer's most successful managers, as coach to the Spanish giants.

Juve stock was indicated down almost 14 percent soon after the trial news broke. Shares were indicated down 3.72 percent at 1.29 euros at 1200 GMT.

Eight of the players likely to be in Italy's opening 11 against Germany are from teams standing trial. Juventus has five players in the Italy squad and three playing for France.

Former prime minister Silvio Berlusconi, the billionaire who owns AC Milan, said he was 'indignant' at the prosecutor's request to relegate his club and said Milan should be handed Juve's last two titles if the Turin team were found guilty.

'Milan have never had refereeing favours, on the contrary, they've been victims of refereeing favours in favour of other clubs,' he said.

After two days of procedural wrangling, the sports trial at Rome's Olympic stadium began in earnest on Tuesday with some of the 26 defendants - club officials, football federation staff, referees and linesmen - personally pleading their case.

The tribunal has said it aims to deliver its verdicts on July 10, the day after the World Cup final in Berlin. All the accused have denied wrongdoing.

Former Juve chief executive Antonio Giraudo was one of the first to speak.

'All kinds of things go on in football: people give Rolexes to referees, people fix the accounts. What I'm saying is that this is an environment in which you have to protect yourself,' he said.

Palazzi asked for Giraudo to be handed a five-year ban plus a 5,000 euro fine for every instance of sporting fraud.

He asked for the same punishment for Luciano Moggi, Juve's former general manager, for brothers Diego and Andrea Della Valle, the owner and president of Fiorentina, and for Claudio Lotito, the chairman of Lazio.

He also asked for all four teams to have points docked at the start of next season.

The lawyer representing former Italian Football Federation (FIGC) official Paolo Bergamo announced that his client had surrendered his membership of the FIGC and was not therefore liable to be tried by the sports tribunal.

Bergamo used to conduct the draw that assigned referees to Serie A matches.

Lawyer Gaetano Scalise criticised the tribunal's decision to allow intercepted telephone calls to be used as evidence and attacked the 'media circus' around the trial.

Those found guilty can appeal and the appeals process must be finished by July 27 - the deadline set by European soccer's ruling body for the FIGC to submit the list of teams for next season's Champions League and UEFA Cup competition.

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'Italy deserved to reach final' - Lippi

Triumphant Italy coach Marcello Lippi tonight insisted it was his team's destiny to reach the World Cup final.

The veteran coach saw stunning strikes deep into extra-time from Fabio Grosso and Alessandro del Piero send the Italians through to Sunday's Berlin final, where they will face either Portugal or France.

The match in Dortmund against hosts Germany had looked destined for a penalty shoot-out, where Jurgen Klinsmann's team would have inevitably been favourites.

Germany have never lost on penalties in the World Cup and Italy have never won.

Italy boss Lippi said: 'These games are decided on a razor's edge. They can go back and forth so quickly.

'But if it had gone to penalties we would still have survived that as well.

'I am very happy with the performance of my team. We played well and deserved the victory.

'We controlled the game. We didn't have many chances but there were not many chances in the game.

'It would have been unjust if we had not won the game or had to go to a penalty shoot-out. We deserved to win this match. No-one can doubt that.

'We were a little better than Germany. Not that much better, but a little better. We hit the woodwork twice.

'We are happy to win such an important match against such a great team in a stadium full of 60,000 cheering German supporters.'

The statistics backed Lippi's argument. Italy dominated possession and had 10 shots on goal, compared with just two from the Germans.

Full-back Grosso scored a brilliant opener in the 119th minute and substitute Del Piero added a second with the last kick of the game.

Lippi said: 'I was sure Del Piero would make an impact on the game. I looked at him very closely. I watched him before the match and I knew he was keen.

'When I sent him on, I said to my friends on the bench he would score the decisive goal.

'He really played such an important role and decided the match.'

Defeated Klinsmann expressed 'huge pride' in his players, saying: 'To lose a game like that after 120 minutes is a huge disappointment but a huge compliment should go to the team for what they have achieved and the character they have shown.

'A big compliment too to Italy, they are in the final and good luck to them.

'That's how it goes and that's what makes football so fascinating.

'We knew that it was going to be a very, very tight game, similar to against Argentina, and we were well prepared.

'Both sides had chances, they hit the woodwork twice in extra-time and we had some good chances as well.

'It's a very young team and they did fantastically well throughout the tournament - the spirit and character they showed was amazing.

'They played tremendously, they gave all their heart, and played passionate, attacking football.

'The World Cup has been a huge success for the team and for the country and has shown a whole new German face to the world and that is something we can all be proud of.'

Lippi refused to be drawn on whether he would prefer to play Portugal or France in the final.

But the Italian admitted he will sit down and watch tomorrow's semi-final with interest.

He said: 'I would be stupid to pick one team as my favourite opponents. This would motivate the other team. We will take whoever comes along.

'We have not reached the end of the road yet. We must try to complete the task and we will wait to see who our opponents will be.'

Italy reach the final with their domestic game embroiled in allegations of corruption, just as they did when they last won the trophy in 1982.

Lippi said: 'Italian football is great football. It is very playful football but I will limit my comments to that.

'This was the match everybody wanted to see and to beat the Germans in their own backyard is amazing.

'We have already received congratulations from the Prime Minister.'

He thought the game had been won in the centre of the pitch where man of the match Andrea Pirlo and Rene Gattuso were outstanding.

Lippi said: 'We were dominant in midfield. We had superiority in midfield.

'I knew we had a great team and my players proved that tonight.

'In the final phase of the match, our play was a higher quality than the German play.

AC Milan midfielder Pirlo admitted it was a dream come true to reach the showpiece in Berlin.

Pirlo said: 'It was a fantastic match, full of emotions and a dream I have had since childhood has come true - I am to play in a World Cup final.

'We deserved to win. We created quite a few chances.
Germany were lucky twice when we hit the post and the crossbar.'

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