Italy's Prodi finally on verge of gaining power

ROME, May 16 (Reuters) Italy's new president began a day-long round of consultations with political leaders today that will enable Prime Minister-in-waiting Romano Prodi to form a government and end a prolonged political vacuum.

The day after he was sworn in as Italy's first ex-communist president, Giorgio Napolitano started meeting a stream of politicians at the ornate Quirinale palace in the first of a series of steps that will end with Prodi taking power.

Napolitano was expected to ask the 66-year-old centre-left leader as early as this evening to form a government, with Prodi's swearing in and the announcement of his cabinet probably set for Wednesday, coalition leaders said.

''I will be ready,'' Prodi told reporters, saying he hoped Napolitano would offer him the mandate later today.

But Prodi, the target of intense lobbying by his coalition's many parties for electoral spoils, still had not put the final touches on his cabinet choices.

Asked if a late-night meeting of coalition leaders yesterday had resolved residual problems, Prodi said: ''The last ones, no, but the next to last ones, yes.'' Prodi's path to power has been delayed, first by a recount of disputed ballots in the closest election in modern Italy, then by the transition between heads of state, whose limited powers include naming prime ministers and approving cabinets.

If all goes according to Prodi's wishes, his government will be set by tomorrow, he will win a confidence vote in the Senate by Friday and another one in the lower house early next week.

That would allow him to assume full power six weeks after the April 9-10 election that ousted Silvio Berlusconi after 5 years in office -- the longest stint in post-War Italy.

CORE PROBLEM Prodi's wafer-thin majority -- by only 2 seats in the Senate -- has raised questions about how long he can keep a coalition bridging centrist Catholics and committed communists in power.

A poll in Corriere della Sera newspaper highlighted voters' contrasting views of Prodi, who is nicknamed ''Professor'', and Berlusconi, who has promised an combative opposition.

Prodi received high grades for competence and honesty -- but trailed Berlusconi in perceived leadership skills.

Prodi appeared finally to have decided on two deputy prime ministers -- Massimo D'Alema, chairman of the Democrats of the Left party who is tipped to be foreign minister as well, and Francesco Rutelli, leader of the centrist Margherita (Daisy) party.

But key ministries including interior, defence and justice were still up for grabs, newspapers said.

One of Prodi's biggest early challenges will be to contain Italy's budget deficit, which is well above the European Union's ceiling, and stimulate an economy that failed to post any growth in two of the last three years.

Two debt ratings agencies have said they will downgrade their ratings unless Prodi quickly produces a strategy to improve the books and boost Italy's dwindling competitiveness.

REUTERS SI RN1522