May 11, 2006

Prodi prepares government after presidential win

By Philip Pullella

ROME (Reuters) - Boosted by the election of his candidate
for state president, incoming Prime Minister Romano Prodi on
Thursday turned his attention to preparing a government to
tackle Italy's economic woes and heal political divisions.

"Now let's get down to work," he told reporters who asked
him on Thursday about the make-up of his government.

The election on Wednesday of Giorgio Napolitano, an
80-year-old life senator and former communist, cleared the way
for a rapid chain of events that should see the government
assume full power by the end of next week.

Napolitano's victory showed that Prodi has the political
stature to keep his troops in line in parliament, which will be
crucial in the future as he tries to govern with a slim

With credit rating agencies pushing for prompt action to
tackle the country's struggling economy and wayward public
finances, Prodi will have his work cut out for him.

Prodi's coalition, ranging from communists to centrist
Roman Catholics, won last month's election by the smallest
margin in modern Italian history.

Outgoing Prime Minister Silvio Berlusconi, who waited three
weeks before conceding defeat, on Thursday vowed that the
opposition would give Prodi "no honeymoon period."

"We will present an opposition without pity," he said.

Prodi, a former European Commission president, has stressed
he wanted to give the world and markets a sign of stability by
getting down to business quickly.


After Napolitano's election Prodi outlined a high-speed
schedule to have his government sworn in by next Wednesday.

Napolitano will be sworn in on Monday afternoon and then he
can formally give Prodi the mandate.

Prodi suggested on Thursday that his cabinet list had for
the most part already been decided. "It's useless for me to
reveal it. For now I have to keep it in my pocket," he said.

One key question is the job Prodi will give to Massimo
D'Alema, chairman of the largest party in his coalition, the
ex-communist Democrats of the Left (DS).

Commentators say D'Alema must get a top job -- deputy prime
minister or foreign minister -- after he withdrew from the race
for state president to help the center left appease Berlusconi.

Prodi is widely expected to give the key post of economy
minister to former European Central Bank board member Tommaso
Padoa-Schioppa to reassure financial markets.

Last 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

However, data on Thursday showed the economy grew by 0.6
percent in the first quarter of this year, offering some good
news for the incoming government.

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