The new prime minister has promised a review of government finance, better tax collection and the reimposition of inheritance tax on the country's wealthiest people AFTER A BITTER contest, Romano Prodi became Italy's new prime minister in April. The result was tight, with Mr Prodi winning 49.8 per cent of the vote versus Silvio Berlusconi's 49.7 per cent. So close was the race that Mr Berlusconi refused to admit defeat, alleging widespread irregularities in the vote. But after days of political stalemate, the court finally awarded 19,002,598 votes to Mr Prodi's centre-left coalition compared to 18,977,843 ballots for the centre-right coalition, in line with provisional results. Mr Prodi was sworn in after receiving the mandate from the country's new president Giorgio Napolitano, whose own election was spiced with discord. Italy is not the first democracy to have seen a tight and acrimonious election, and if anything, the race showed that the population had high hopes for its government to resolve the country's economic problems. Gabriella Meneghello, the consul-general of Italy, said: 'The electorate was divided but the interest was very strong. 'People were very much exasperated and knew that something had to be done for the future.' Much of this annoyance was with the country's critical fiscal shape. Despite being the richest man in Italy, owning football club AC Milan and three of the country's most popular television stations, Mr Berlusconi gave little glow to the nation's economy as the prime minister. State deficit had increased, privatisation stagnated and the national debt stood at 106.4 per cent of GDP last year. With its debt closing in on a record high of 108 per cent of GDP, Italy, despite being the seventh-largest economy in the world and a member of the G8, was recently given the unflatteringly name 'sick man of Europe'. 'Italy is split half and half - half of the people feel it would be better with Mr Berlusconi, half with Mr Prodi,' Mrs Meneghello said. 'The truth is that the economy is always difficult to forecast, and I am not sure there is much that one government can do different from another nowadays.' Much of the support Mr Berlusconi had came from the business sector - not surprising given his background. The small and medium-sized enterprises, which make up a large part of Italy's economy, felt the former prime minister was already doing the best he could and it was just a matter of time before the situation righted itself. For them it was a case of 'better the devil you know'. The working classes, though, did not agree and it was they who rang Mr Prodi in. Mr Prodi might have won for now, but his road ahead will indisputably be arduous. He has promised a review of government finance, better tax collection and the reimposition of inheritance tax on the country's wealthiest people. Coupled with plans for a pension reform and public spending cuts, Mr Prodi's undertaking is immense and there is a lot at stake. But then he is no novice. He is one of Italy's most successful post-war prime ministers - this is the second time he has won the top job. After graduating from Milan's Catholic University with a degree in economics, he went on to study at the London School of Economics and Harvard. For two separate terms he was chairman of IRI (the powerful state-owned industrial holding company) in the 1980s and 1990s, and under his watch more than 100 state enterprises turned loss to profit. He has already started his bid to soothe the financial markets, which are understandably tense about Italy's near-critical debt. His appointment of Tommaso Padoa-Schioppa as finance ministry head could go a long way to winning their support. A highly respected economist and former board member of the European Central bank, Mr Padoa-Schioppa has limited political experience and no strong affiliation with any political party, which could work in his favour. Mr Padoa-Schioppa's appointment requires a lot of faith from Mr Prodi, as his government only has a weak majority in parliament, and some are arguing that the new finance head does not have the weight to bargain with the opposition and the media. A survey by the Institute for Economic Studies and Analyses indicates that business confidence in Italy is at its highest in five years. A major factor in this might be Mr Prodi's pledge to revive the economy by slashing labour costs by Euro10billion ($98.9 billion) within a year and making emergency spending cuts. Mrs Meneghello said Mr Prodi, a quiet man who is the antithesis of flamboyant Mr Berlusconi, had shown his steely determination in his previous positions. 'He was the man who, against a number of odds, brought Italy into the European monetary union. It was done day by day with a lot of determination and sacrifice,' she said. Mr Prodi is also famed for his tact at the negotiating table and his skills in knowing when and how to compromise. With his controversial proposals on reforms, these are the strengths that he will need to draw on in the coming days. The first source of conflict he will face is the emotive and critical issue of pensions. Public spending cuts have already given rise to protests in Italy. But Mrs Meneghello is optimistic that Mr Prodi can convince those who oppose his reforms that it is the right decision. He has the support of the working classes. 'The difference I see in the future with the new government is that perhaps it could be a little easier for Mr Prodi to have labour accepting some much needed reform,' she said.
