Berlusconi - the younger brother of club owner Silvio - was filmed by reporters on Saturday at a political meeting in Monza near Milan describing Balotelli as "negretto della famiglia'' - translated as "the family's little n****''.
Powar - whose group work throughout Europe to combat discrimination - says racism is an issue which Italy must address. He claimed: "There is a disease in Italy, and that disease is racism. For us it reinforces the attitudes we have seen in Italy over the last few years with the Kevin-Prince Boateng incident and the previous attitude of Lazio fans."
Italy international Balotelli joined AC Milan from Manchester City on transfer deadline day, scoring twice on his debut against Udinese on Sunday.
"Okay, we are all off to see the family's little n****. He's a crazy head. All the young ladies are invited as well - you can even have a chance to meet the president (Silvio Berlusconi)," Paolo Berlusconi is reported to have said.
The incident comes just four weeks after Silvio Berlusconi praised midfielder Kevin-Prince Boateng for walking off the pitch after he was racially abused during a friendly against Pro Patria. Lazio were given a suspended one-game stadium ban by UEFA after anti-semitic chanting by home fans in a Europa League game against Tottenham in November.
"Many have seen the impact Berlusconi has had as president and some rhetoric on immigration contradicts the support of Boateng," Powar added. "The whole thing is ridden with contradiction. He wants to be seen defending his team. The success of Milan, we should be clear, is linked with political success. He was always going to support his players.
"Here we have his brother who is arguably doing worse things than (the Pro Patria fans) because he is in a position of power."
The Italian Football Federation (FIGC) told Press Association Sport that unless a formal complaint was received they would not be investigating the matter. And Powar said: "There is nothing the club will do. We shouldn't fool ourselves. In time we will see condemnation about this. It contradicts what Italy says it is about; a modern nation."
A spokesman for AC Milan told Press Association Sport on Wednesday: "We will not be making any statement on the matter."