Italy's government set for showdown

Rome (Reuters) - The Italian government stopped work yesterday and said it was ready for a showdown with its rebellious hardline ally, the Communist Refoundation, a move which could cause the collapse of the coalition.

The Prime Minister, Romano Prodi, prepared to meet President Oscar Luigi Scalfaro to discuss the crisis that threatens the first Italian government to include the left since the Second World War.

Mr Prodi told union leaders earlier that his majority was in jeopardy after the Refoundation refused to back his 1998 budget, which the government considers essential to secure Italy's membership of the single European currency. The hard-left party, which has ensured Mr Prodi's majority in the lower Chamber of Deputies, says the budget contains unacceptable cuts in welfare and pensions. Without its backing, he may not be able to get his budget passed and his 17-month-old government would be at risk.