Last updated: May 17, 2006 8:06 pm

Prodi names Padoa-Schioppa as finance minister

Romano Prodi, Italy’s new prime minister, on Wednesday included two former premiers and one of Europe’s leading central bankers in his government, which he vowed would work as “a team and not a collection of prima donnas”.

Naming Italy’s 61st government since the second world war, Mr Prodi said: “The first commitment will be to rebuild a spirit of solidarity and a consensus on the goals needed for the country to move forward.”

Mr Prodi’s coalition defeated Silvio Berlusconi’s centre-right alliance in Italy’s April 9-10 general election by a margin so narrow that the new government may face great difficulty in implementing its programme.

The prime minister’s bloc has a mere two-seat majority over the opposition in the Senate, parliament’s upper house, where the government will face a confidence vote as early as Friday and where Mr Berlusconi has pledged to put up relentless opposition.

The coming months are likely to see knife-edge battles in the Senate over sensitive items of government legislation, not least Mr Prodi’s plan to revive Italian business competitiveness by slashing billions of euros off companies’ labour tax bills.

Some opposition may even come from the government’s own ranks, which include centrist technocrats and moderate socialists as well as hardline communists.

Mr Prodi’s most important appointments were that of Tommaso Padoa-Schioppa, a former European Central Bank board member, to the finance ministry, and that of Massimo D’Alema, a former premier, to the foreign ministry.

He named two deputy prime ministers – Mr D’Alema, who is president of the Democrats of the Left (DS), the government’s largest party, and Francesco Rutelli, leader of the Margherita, the second biggest party. Mr Rutelli will also be culture minister.

Mr Prodi has included extra weight and experience in his government by making Giuliano Amato, another former DS premier, his interior minister.

The most urgent tasks facing the government will be to produce a rigorous assessment of the public finances and to announce measures curbing Italy’s rising budget deficit and public debt.

Standard & Poor’s and Fitch, two credit ratings agencies, have threatened to downgrade Italy if the government does not take prompt action.

Mr Padoa-Schioppa is considered an ideal figure to meet the challenge, since he commands the respect of financial markets and is committed to fiscal discipline and structural economic reform.

Some political commentators said Mr Prodi’s government had a distinctly leftist complexion, with the DS and two small communist parties holding ministries such as labour, economic development, health and welfare.

“I think the government will function. The preconditions are there,” Mr Prodi told Franco Marini, the Senate speaker. He added that his government would work as “a team, not a collection of prima donnas”.

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