Media blames "hidden powers" for Italy spy scandal

ROME, Oct 27 (Reuters) Revelations that Prime Minister Romano Prodi had his tax records spied on illegally roused allies and the media today to blame ''hidden powers'' and corrupt officials for the scandal.

Newspapers spoke of a security network running amok, and possibly at the service of corrupt officials, in the latest scandal to hit the Italian administration.

''It has the flavour of blackmail, of intimidation, of institutional disloyalty that should not have a place in a free democracy like ours,'' Italy's leading Corriere della Sera daily said in a front-page editorial.

Prodi and his wife, Flavia, had their tax records checked illegally time and again, as did his predecessor, Silvio Berlusconi, past and present heads of state, soccer stars and entertainers, according to reports published today.

Milan prosecutors are leading the investigation which is focusing on officials at the tax police and other state agencies.

Left-leaning La Repubblica newspaper questioned whether democracy itself was being manipulated by unknown powers.

''Politics is ending up directly under attack by 'hidden powers','' the paper said.

Some of Prodi's allies openly suggested Berlusconi's former centre-right government was to blame, but one of his closest associates, former economy minister Giulio Tremonti, noted Berlusconi too was a victim.

''Berlusconi's data and that of his family have been illegally checked 800 times,'' Tremonti said.

Berlusconi played down the scandal, calling it a smokescreen'' to distract Italians from Prodi's troubles governing with a razor-thin majority.

WHO'S WHO The names of the Italian personalities snooped on over the past two years read like a ''Who's Who'' list of Italian society and included an Italian prince and former central bank governor, Antonio Fazio.

Even Italy's spy chief, Nicolo Pollari, found his secret telephone conversations published in newspapers thanks to leaks of police surveillance records.

Pollari's military intelligence agency, Sismi, is at the centre of several scandals, including possibly helping the CIA illegally kidnap a terrorism suspect in Milan in 2003 and paying journalists to plant stories and spy on magistrates.

Last month, police arrested a former manager and employees at phone company Telecom Italia in a separate probe into alleged wiretaps to collect information on well-known businessmen.

''The general impression that remains is this: state structures helping corrupt officials on the inside,'' said Anna Finocchiaro, the centre-left Senate leader.

''We have one obligatory path - to clean up -- at every level, in the ministries, the administrative offices and the telephone companies.'' Reuters PDM RN1624