May 1, 2006

Pressure on Ciampi to install new Italy government

By Philip Pullella

ROME (Reuters) - President Carlo Azeglio Ciampi was under
pressure on Monday to quickly end Italy's post-election
political stalemate by asking the narrow victor, Romano Prodi,
to form a new government.

Once the May Day holiday is over, outgoing Prime Minister
Silvio Berlusconi, who earlier contested the result of the
April 9-10 poll, is due finally to resign, setting the clock
running for a new administration to take office.

With credit rating agencies pushing for prompt action to
tackle the country's struggling economy and wayward public
finances, Italy could have a centre-left government led by
Prodi in place by the end of the week, under a best-case

But that decision rests squarely on the shoulders of the
85-year-old Ciampi, who is due to receive Berlusconi's
resignation early Tuesday afternoon.

Ciampi, whose own term expires in mid-May, must decide
whether he will give Prodi the mandate or, as he has indicated
in the past, leave the task to the next president.

Prodi has said his cabinet team would be ready by Friday,
although he made it clear that it was up to Ciampi to decide.

"If I get the mandate soon, I have to have my list of
ministers ready. If I get it later, I will just have to hold on
to the list for a while," Prodi told reporters on Monday. He
stressed, however, that he was "not dictating a date to

Prodi's coalition, ranging from communists to centrist
Roman Catholics, won the election by the smallest margin in
modern Italian history. Berlusconi announced he would quit only
after centre-left speakers of parliament were elected at the

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, agrees, he could
begin ritual consultations with political leaders on Wednesday
and give Prodi the mandate by the end of the week.


Prodi has said his objective in speeding up decisions on
the make-up of his cabinet was to be prepared for a call from
the presidential palace.

Another option would be to move up the election of the new
president, who is chosen by both houses of parliament and
representatives of Italy's 20 regions, to next week and let him
give Prodi the mandate.

Speakers of both houses of parliament were elected on
Saturday. But the four ballots needed in the upper house Senate
underscored the difficulties Prodi could have with his slim
majority there.

With some 10 parties in his coalition, Prodi has many
allies to keep happy and few top jobs to hand out.

He may decide to give the key post of economy minister to a
respected non-politician to reassure markets worried by the
state of Italy's finances. Former European Central Bank board
member Tommaso Padoa Schioppa appears to be in pole position.

Lat year, the economy failed to grow for the second time in
three years, the public deficit reached 4.1 percent of GDP, its
highest level since 1996, and the massive public debt rose to
106.4 percent of GDP, the first increase for more than a

Prodi must immediately draw up a strategy to avert the
danger of Italy's public debt being downgraded.

Standard & Poor's and Fitch have indicated they will lower
Italy's credit ratings unless the new government quickly sets
out reforms to cut the deficit and improve the country's
dwindling competitiveness.

The agencies will be focusing on the blueprint for the 2007
budget and multi-year economic targets, which Prodi must
present to parliament by July.