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Prodi's resignation leaves President to seek new Prime Minister

Italian President Giorgio Napolitano begins consulting the country's political leaders today as he seeks a new head of government after the surprise resignation of Prime Minister Romano Prodi yesterday.

Napolitano will likely favor a second Prodi government, or a new premier from within Prodi's coalition, rather than force Italians to return to the polls just 10 months after the last national election. The meetings with party and parliamentary leaders begin at 10:30 a.m. at the presidential palace in Rome. „I'd bet on a second Prodi government,” said Luigi Speranza, an economist at BNP Paribas SA in London.
„That's what the first comments from Italian politicians suggest.” Prodi was the head of Italy's 61st government since World War II, and he resigned after failing to hold his majority in a key Senate vote on foreign policy, exposing the divisions in his nine-party coalition. His grip on power was always precarious because he held just a one-seat advantage in the Senate after winning the closest elections in modern Italian history.
Prodi, 67, has depended on the support of seven honorary, life-appointed Senators to pass laws and at times keep his government from collapsing. Former Prime Minister Silvio Berlusconi's government changed the electoral law before the April vote, virtually ensuring the winner would have a narrow majority in the legislature's upper house.

Popular support for Prodi has been waning, even as confidence in his government has picked up. Confidence in Prodi, a former European Commission president, fell to 36%, the lowest level since the election, according to a February 14 poll published in la Repubblica. The survey showed that confidence in his government rose 2 percentage points to 44%.
Support for Prodi slipped after he introduced a budget that raised taxes on most people earning more than €40,000 ($53,000) a year as he sought more revenue to bring Italy's budget deficit back within European Union limits. The economy expanded 1.1% in the Q4, the fastest pace in seven years. The growth helped lift consumer confidence but did little for Prodi's personal standing.
The resignation will not have any immediate effect on Italy's sovereign debt rating, Standard & Poor's said in an e-mailed statement. S&P cut Italy's credit rating to A+ from AA-six months after the election „based upon the inherent weakness of the multiparty coalition government,” the statement said.

Berlusconi's Forza Italia party and two of his opposition allies called for new elections after Prodi's resignation. Pier Ferdinando Casini, the leader of the Union of Christian Democrats party. Casini briefly abandoned Berlusconi's coalition last year, causing Berlusconi to resign and then form another government, a common occurrence in Italy where the electoral system tends to favor the creation of unwieldy coalitions, rather than unified parties.
Casini suggested he may offer support to a new government as long as it wasn't led by Prodi. „Let's sit down around a table and put our policy priorities in the middle,” Casini said in an interview with RAI state television. „We need to try to give the country the answers it seeks.” The Democrats of the Left, the largest party in Prodi's nine-way coalition, said it „reconfirmed full confidence in Prodi,” in a statement put out from the party's headquarters. „There needs to be a political clarification that restores the cohesion of the center-left coalition,” the statement said. Leaders of other parties in Prodi's coalition made similar comments.

In yesterday's vote, Prodi's coalition failed to back a motion in support of Italy's participation in the NATO-led Afghanistan mission, showing the premier didn't have a majority in the Senate. Prodi's first government fell in 1996 when the Refounded Communist Party withdrew its support. Yesterday Prodi fell victim to two, far-left „pacifists” who refused to vote with their parties. The previous government planted the seeds of instability in the Senate by changing the electoral law.
Berlusconi's electoral law includes a so-called „majority prize” that awards the winner a minimum of 54% of the seats in the lower house of parliament. The majority bonus doesn't work in the Senate, which selects candidates regionally, meaning only a landslide victory can produce a margin of more than a dozen in the 315-seat assembly. The two houses have equal legislative powers. (Bloomberg)