Italy's Prodi wins crunch budget vote in Senate

ROME, Dec 15 (Reuters) Italian Prime Minister Romano Prodi won a confidence vote in the Senate today over the unpopular 2007 budget, clearing the way for its final approval by parliament.

The budget aims to cut Italy's deficit to below the European Union's ceiling of 3 percent of gross domestic product for the first time since 2002. Had Prodi lost the vote, he would have had to resign.

With his poll ratings at their lowest since he beat Silvio Berlusconi in an April election, Prodi had come out fighting to defend Economy Minister Tommaso Padoa-Schioppa and his budget, which increases taxes on higher earners.

''I did it for the good of the country,'' Prodi told reporters as he arrived at a European Union summit in Brussels. ''Medicine can be bitter, but if you don't take it, you don't get better.'' To ensure support from his 9-party centre-left coalition, Prodi put the budget bill to a confidence vote in the Senate where he has only one seat more than Berlusconi's bloc.

Economists say the budget does little or nothing to lower spending. Many Italians complain they will feel the pinch and 58 percent say they have little or no faith in Prodi's government, a jump from 36 percent in July, a poll showed this week.

''Prodi's medicine isn't just bitter, or very bitter, it's killing the patient,'' said opposition senator Roberto Calderoli.

''FINANCIAL COLLAPSE'' Addressing the Senate before the vote, Padoa-Schioppa said the budget was needed to avoid ''financial collapse'' and Italy must start cutting its 1,600 billion euro (2,098 billion dollar) debt which costs the state 70 billion euros a year in interest.

''The excessive accumulation of debt is short-sighted, selfish, it means sacrificing the well-being of tomorrow for today's, robbing our children and our grandchildren,'' he said.

The budget must be approved by parliament by the end of the year.

Prodi's allies have pushed for a ''change of pace'', spurred by an opposition rally led by Berlusconi this month which drew hundreds of thousands of supporters, and by the regular cat-calls Prodi gets from right-wing voters.

Italian media have speculated this could mean dumping Padoa-Schioppa.

A poll showed the economy minister was the least popular member of the government, with an approval rating of 36 percent. But Prodi said he approved of every part of the budget and called Padoa-Schioppa ''a great economy minister, period''.

REUTERS PDS PM0137