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Italy facing new elections as far-left rejects budget plans

The Italian government was on the verge of collapse last night as the far-left party Rifondazione Comunista gave its final thumbs-down to the 1998 budget.

That would deprive Romano Prodi, the Prime Minister, of the votes he needs to get Italy into shape for the single European currency.

But all is not yet lost, says Andrew Gumbel.

It was an unusually impassioned Romano Prodi who took the podium in the Chamber of Deputies yesterday afternoon and gave the most important speech of his 17 months in office. Reforming the welfare state, he said, was "the last and indispensable step on our march towards Europe". He appealed to all sides, not just Rifondazione Comunista, to safeguard the country's future.

His half-hour speech made little impression on Fausto Bertinotti, Rifondazione's intransigent leader. "What the government is proposing is totally inadequate," Mr Bertinotti announced."This budget is unacceptable in its present form and we will vote against it."

That seemed to be Rifondazione's last word on the matter, and Mr Prodi's centre-left coalition thereby lost its parliamentary majority.

The next few moves have been sufficiently well mapped out in advance to be near-certain predictions: Mr Prodi will offer his resignation and, with the political mood set against forging a new, broader coalition, the country can look forward to its third general election in less than five years.

But that still leaves the budget. President Oscar Luigi Scalfaro has made clear that he will not dissolve parliament until the package has been passed, a position that will almost certainly drag out the crisis for another month at least.

Mr Prodi can expect to be reinstalled as a caretaker premier, charged with the task of finding the extra votes he needs to push the package through and guarantee Italy's place in European monetary union.

That, in turn, will produce some unseemly haggling with the present opposition - a kind of pre-election campaign fought over the fine print of the public finances - but will probably result in the legislation that Mr Prodi has been looking for all along. The election would be postponed until February or so.

What interest does Rifondazione have in sabotaging the Prodi government if the thing it opposes - cuts in pensions and welfare spending - will probably go through anyway?

There are two reasons. First, opinion polls suggest that a new election would give Rifondazione more votes and the main government and opposition parties a few less. And secondly, a new election would destroy current attempts by the major parties to reform the constitution and make the country more governable.

"More governable" means, first and foremost, reducing the influence of small parties like Rifondazione that for too long have held Italy to ransom. Instability may be bad for the country, but it suits Mr Bertinotti just fine.