April 14 (Bloomberg) -- Billionaire media mogul Silvio Berlusconi won a majority in both houses of the Italian parliament and will return to power for a third term as premier.

Berlusconi's People of Liberty party and its allies took 166 seats in the Senate, the upper house, to 138 for Walter Veltroni's Democratic Party and its partner, according to a projection by RAI state television. In the Chamber of Deputies, Berlusconi took 45.9 percent of the vote compared with Veltroni's 38.9 percent, RAI estimated. That would give Berlusconi about 340 lower-house seats out of 630.

``Berlusconi is back,'' said Maurizio Pessato, chief executive officer of polling company SWG Srl in Trieste, Italy. ``With this result, he can last.''

Elections to choose Italy's 62nd government since World War II were called three years early after Prime Minister Romano Prodi's government collapsed in January. Prodi had only a single-seat majority in the Senate. Pollsters and analysts had raised the possibility that Berlusconi might be hamstrung by a similarly narrow margin in the upper house this time round.

``The months and years ahead will be difficult,'' Berlusconi said during a telephone interview on RAI. ``I'll use all my experience over the next five years to modernize the country.''

Veltroni called Berlusconi to concede defeat and later told reporters in Rome that ``the result is clear.''

Tax and Spending

Berlusconi, 71, is poised to take over a $2.4 trillion economy on the cusp of recession. He has promised to revive economic growth with tax cuts and more spending on public works. The budget deficit is widening, consumer confidence has slipped to a four-year low and gross domestic product is set to lag behind the European Union average for a 13th year.

The International Monetary Fund forecast April 9 that the Italian economy, Europe's fourth biggest, would expand just 0.3 percent this year, the slowest of the more than two dozen ``advanced economies'' included in its World Economic Outlook report. Italy is the euro region's most-indebted country and ranks last in labor productivity in the 30-member Organization for Economic Cooperation and Development.

Berlusconi was helped to a bigger-than-expected victory thanks to his ally, the anti-immigration Northern League, which posted its best result since 1996 with a projected 8.7 percent of the upper-house vote and 22 senators. That will give the Northern League a big say in molding the new government's agenda. It advocates devolving central-government powers over schools, police and taxes to local authorities and greater controls against illegal immigrants.

`Difficult Ally'

The League ``isn't an easy beast to tame,'' Pessato said. ``It's a difficult ally, but it's key for a Senate majority.'' Berlusconi ``will have to negotiate a lot with them.''

One area where there is agreement between the coalition partners is on stopping the sale of the state-controlled airline, Alitalia SpA. Berlusconi put the issue into the spotlight of the election campaign, calling Air France-KLM Group's offer for the unprofitable carrier ``arrogant and unacceptable.''

``We will find a domestic solution for Alitalia that defends the country's national interests,'' Renato Brunetta, one of Berlusconi's economic advisers, said on RAI television.

Berlusconi, Italy's third-richest man, entered politics 14 years ago promising to bring about an economic miracle. In his last stint as prime minister between 2001 and 2006, the country slipped into recession three times, the budget deficit widened to the highest in the European Union and debt increased. Now Berlusconi says he can't ``perform miracles'' and will be forced to make ``tough and unpopular decisions.''

`Essential'

``Cutting taxes is essential to boost productivity, consumer and business confidence,'' Francesco Perfetti, a professor of politics at Rome's Luiss University, told Bloomberg Television. ``The problem is that neither Veltroni nor Berlusconi have said how they will fund that.''

Berlusconi's 52-year-old rival Veltroni, the former Rome mayor, painted himself as the candidate of change even though outgoing Prime Minister Prodi, who had just a 30 percent popularity rating in December, is the president of his party. In his final campaign rally in Rome's Piazza del Popolo, Veltroni called on Italians to ``turn the page'' on the aging political class represented by Berlusconi.

Berlusconi's and Veltroni's coalitions captured almost 80 percent of the vote, indicating that Italy may be moving toward more of a two-party system and away from the broad coalitions of disparate parties that have led to so many postwar governments.

The Rainbow coalition, a group of communist and green parties that had been in Prodi's government, may have taken so little of the popular vote that it won't win any seats in the Senate and the Chamber.

To contact the reporters on this story: Steve Scherer in Rome at scherer@bloomberg.net; Flavia Krause-Jackson in Rome at fjackson@bloomberg.net.

Last Updated: April 14, 2008 15:44 EDT