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Prodi May Be Asked to Try Again as Italy's Premier (Update4)

By Steve Scherer and Flavia Krause-Jackson

Feb. 23 (Bloomberg) -- Prime Minister Romano Prodi probably will be asked today to see if he has a parliamentary majority after his allies renewed their support late yesterday and unanimously agreed to back the premier's agenda.

Prodi resigned two days ago after losing a foreign policy vote in the Senate. The nine party leaders approved a list of priorities that Prodi presented to them, paving the way for President Giorgio Napolitano to ask the prime minister to seek the support of Parliament for his current government, or form a new Cabinet with the same coalition.

The premier's allies are trying to bolster their one-seat advantage in the Senate by wooing a handful of moderate Catholic senators who have been voting against the government. Prodi isn't likely to last as leader because of his narrow majority, which resulted from the closest election in modern Italian politics, said Maurizio Pessato, chief executive officer of Trieste, Italy-based polling company SWG Srl.

``Prodi probably will be asked to form a new government,'' said Pessato. ``But without some votes from the centrists in the Senate, the government would last just three or four months.''

Prodi, 67, led Italy's 61st government since World War II. His Feb. 21 defeat in the Senate exposed divisions in his coalition, which includes both communist and Catholic parties. His nine-month-old government had concentrated on measures to underpin economic growth, including reducing the deficit below the European Union limit, fighting tax evasion, and freeing up overregulated segments of the economy.

Consultations

Napolitano began a series of 13 meetings with parliamentary and party leaders at 9 a.m. at the presidential palace in Rome. He'll wrap up this round of consultations at about 8 p.m. after talks with former presidents. Afterward, he could make a decision to meet with Prodi and give him a mandate, or continue consultations.

The new plan approved yesterday simplifies the 180-page platform drafted during last year's election campaign into 12 points. Among Prodi's priorities are lowering the cost of the state pension system, building liquefied natural gas terminals, and renewing funding for the Afghanistan mission.

The government crisis was sparked after two communist senators refused to back Italy's presence in Afghanistan.

`New People'

``We're convinced that the clarification within the center- left coalition will allow Prodi to have his premiership confirmed through confidence votes in Parliament,'' Clemente Mastella, justice minister and leader of the small Udeur Catholic party, said after meeting the president today. Mastella said he was ``confident'' Prodi had a majority in the Senate.

Politicians on both sides say that early elections aren't desirable, in part because the current electoral law would likely create the same gridlock in the Senate. The small Northern League party is the exception.

After meeting with Napolitano today, former Prime Minister Silvio Berlusconi denied he was seeking early elections, leaving the door open for his participation in a temporary, ``institutional'' government that would be charged with a few important tasks, like changing the electoral law.

``For the good of our country,'' Berlusconi told reporters, ``we asked that there be no replay'' of Prodi's government.

A Berlusconi-led coalition would win early elections, according to an Ispo Ltd. poll published in today's Corriere della Sera newspaper. Berlusconi's bloc would win 51 percent of the votes compared with Prodi's 47 percent, according to a survey of 1,917 potential voters with a margin of error of 2.5 percentage points.

Same-Sex Unions

Prodi yesterday abandoned a bill allowing same-sex unions that his Catholic allies -- and the Vatican -- opposed in order to try to secure a few extra Catholic votes in the Senate. The move also placates his Catholic allies who had threatened to sink the government to stop the bill's passage.

Sought-after Senate votes include Marco Follini, who heads his own small party called Middle Italy, and Raffaele Lombardo's Movement for Autonomy party, which has two seats.

Pier Ferdinando Casini, whose Union of Christian Democrats commands 20 Senate seats, said he was willing to negotiate with Prodi's coalition as long as Prodi is dropped as the leader. After meeting Napolitano today, Lorenzo Cesa, the secretary of Casini's party, said someone other than Prodi should form a temporary government in order to pass a new electoral law.

`Very Unlikely'

``If you ask Casini who he wants to be premier he'd say Mario Monti,'' said Gianfranco Pasquino, a professor of politics at Johns Hopkins University's School of Advanced International Studies in Bologna, Italy, referring to the former European competition commissioner. ``Either way, it's very unlikely a new government will be able to last more than a year or so.''

Prodi has depended on the support of seven honorary, life- appointed Senators to pass laws and at times keep his government from collapsing.

Should Napolitano reject Prodi's resignation, the premier would have to ask parliament to vote confidence in his current government next week. Should Prodi be asked to form a new government, he would present his new Cabinet to Napolitano next week, and then face a confidence vote in both the Chamber of Deputies and the Senate afterward.

If Prodi fails, Napolitano would be forced to seek an alternative candidate to head a temporary, or ``institutional'' government, or call for new elections.

``The main risk is a prolonged period of political uncertainty,'' said Marco Valli, an economist at UniCredit Markets & Investment Banking in Milan. ``That could threaten the reform process and jeopardize preliminary good results to liberalize the economy and fight tax evasion.''

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

Last Updated: February 23, 2007 07:38 EST