May 23, 2006

Italy’s Prodi wins final parliamentary approval

By Robin Pomeroy

ROME (Reuters) - Italy's new prime minister Romano Prodi
won the final seal of approval from parliament on Tuesday,
allowing his centre-left government to get on with running a
country whose public finances are spiraling out of control.

Prodi's victory in the lower house, where he enjoys a much
bigger majority than in the Senate (upper house), had been
expected. The chamber passed the confidence vote, the last step
in the transition from Silvio Berlusconi's record five-year
stint in power, with 344 "yes" and 268 "no" votes.

"It could not have been better than this," Prodi, who won a
parliamentary election last month by a razor-thin margin, told
reporters after the vote.

But the good news ended there for Prodi as the Organization
for Economic Co-operation and Development (OECD) warned that
his government may be too weak to achieve badly needed but
unpopular economic reforms.

Prodi told parliament ahead of the vote his priority was to
drag Italy out of stagnation and stem a growing budget deficit
which he said was in a critical state.

"We have gone back under the spotlight of the international
markets. In the next few weeks we will take decisions on how to
move," Prodi said, without specifying any policies that would
likely have to include spending curbs and tax hikes.

Prodi based his election campaign on a promise of "serious"
government compared with Silvio Berlusconi's tax-cutting
stance, but denied accusations by his centre-right rival that
once in power he would raise taxes across the board.


In its twice-yearly report on economic outlook, the

Paris-based OECD said Prodi's pledge to push through
economic reforms was undermined by his slim parliamentary

"Political risks seem especially high," the OECD said of
Prodi's ability to enact structural reforms.

"It may be difficult to undertake reforms given the thin
parliamentary margins and fragmented nature of the ruling
coalition," it said.

Prodi's government is drawn from eight parties stretching
from Roman Catholic moderates to committed communists.

It has a majority of nearly 70 seats in the lower house,
despite its slim election victory, thanks to an electoral
system which handed a bundle of extra seats to the winning

But in the upper house it enjoys only a two-seat majority,
which is likely to make life hard for Prodi as he will have to
rely on the loyalty of his unwieldy allies to pass any laws.

Underscoring the narrow room for maneuver, the Senate
approved the new government last Friday by 165 votes to 155.
The margin was boosted by Italy's seven unelected senators for
life and one independent senator.

One of Prodi's first major decisions will be whether to
adopt a "mini budget" to rein in the 2006 budget deficit which
Berlusconi's government forecast at 3.8 percent of GDP, but
which deputy economy minister Vincenzo Visco said was more
likely to be 4.5 percent without new corrective measures.

Berlusconi, narrowly defeated in the election, repeated his
hope that a parliamentary commission would find
"irregularities" in the April 9-10 election result and overturn
Prodi's win.

Berlusconi told a TV chat show late on Monday that if the
election were re-run now, an opinion poll he commissioned
showed his coalition would win 52.8 percent of the vote against
46.7 percent for Prodi's bloc.

That claim will be put to the test on Sunday and Monday
when many Italians go to the polls again in local elections to
elect the mayors of large cities, including Rome and Milan.

(Additional reporting by Gavin Jones and Silvia Aloisi)