May 2, 2006

Berlusconi resigns, paving way for Prodi

By Paolo Biondi and Robin Pomeroy

ROME (Reuters) - Italy's Prime Minister Silvio Berlusconi
handed in his resignation on Tuesday, ending weeks of political
uncertainty and opening the way for centre-left leader Romano
Prodi to form a new government.

Berlusconi had contested Prodi's razor-thin victory in a
national election last month but was forced to concede after
lawmakers elected centre-left speakers for parliament at the
weekend, showing Prodi can control the assembly with his slim

The resignation marked the end of a turbulent five-year
spell as prime minister for the billionaire media magnate who
won power promising an economic miracle but instead presided
over a long period of stagnation.

It also signaled the start of a swing to the left for the
euro zone's third largest economy as Prodi brings to power his
cumbersome coalition which ranges from old school communists to
Roman Catholic moderates.

President Carlo Azeglio Ciampi asked the media tycoon to
remain in office as caretaker until a new government is sworn
in, the president's palace said in a statement.

In what must have been a painful moment for Berlusconi, who
often warned Italians of the threat posed by communists, he had
to personally give notice of his resignation to the head of the
communist party who is the new leader of parliament's lower

Asked how his brief meeting with Fausto Bertinotti went,
Berlusconi said: "Very well, I have always got on well with


Prodi, who won the election by the smallest margin in
modern Italian history, welcomed the long-awaited resignation.

"Now it's up to us to form a new government in the
timescale that will be set out by the president," Prodi told

But 85-year-old Ciampi has yet to say whether he will start
consultations this week on the formation of a government, or
delay the move until after parliament elects a new head of
state later this month.

Ciampi, whose mandate expires on May 18, has always said
his successor should oversee the transition, but he faces huge
pressure to do it himself with credit rating agencies pushing
Italy to take swift action over its wayward public finances.

If Ciampi bows to the pressure, Italy could have a
government led by Prodi in place by the end of the week.

Prodi has promised to have a cabinet team ready by then in
case Ciampi gives him the green light, and on Tuesday he said
he hoped "the absence of a government does not go on for long."

Berlusconi denounced widespread irregularities in the vote,
but Italy's Supreme Court sanctioned the count and said any
further complaints should be reviewed by the new parliament.

Prodi, a former European Commission president, has stressed
that Italy could give the world and markets a sign of stability
if his government gets down to business quickly.

If Ciampi, a former central bank governor, declines to
oversee the transition then he may decide to step down a few
days earlier than originally scheduled to try to get a new
government in place more quickly.

(Additional reporting by Giuseppe Fonte and Gavin Jones)