By Robin Pomeroy

ROME, May 30 (Reuters) Italian Prime Minister Romano Prodi issued an ultimatum to squabbling members of his centre-left coalition government today, saying they must either unite behind him or find a new leader.

After a drubbing in local elections at the weekend, Prodi told a newspaper his allies were to blame for undermining him during his first year in office and rejected their calls to change policy to appease parts of the electorate.

''From now on the music is going to change. They'll do as I say, take it or leave it,'' he told La Repubblica daily.

Prodi's ''Union'' coalition lost soundly in Italy's wealthy north at the weekend polls, amid concerns over crime, family values and the economy. It was a major blow in his first big electoral test since beating Silvio Berlusconi a year ago.

With the opposition saying Prodi should resign after the defeat, his allies have urged him to quickly issue voter-friendly policies such as tax reductions for home owners or more social spending for the poor.

Prodi rejected such talks as populist and said there was a ''healthy'' and an ''unhealthy'' way to govern.

''The unhealthy way is to ride the waves of each problem, follow each protest, satisfy every request. The healthy way is to continue to get the country's finances back in order to guarantee a future of stability and development,'' he said.

UNDER ATTACK Describing the former European Commission president as ''a bundle of rage and pride'', the left-leaning La Repubblica said Prodi was ''in the trenches'', under attack from both the opposition and his own allies.

Prodi hit back at both, saying Berlusconi was incapable of governing as he had run a high budget deficit during his five years in power. But his greatest ire was for his own allies.

''How can one give an image of good governance when it is your government allies who are the first to pick apart the policies you make?'' he said.

''When this happens, not even Leonardo da Vinci or Nicolo Machiavelli could solve the problem.'' Prodi has been governing with a razor-thin parliamentary majority and has already resigned once, after the far left of his Catholics-to-communists coalition deserted him in a vote on foreign policy in February.

Centre-left parties have largely ignored his demand that they speak through a single government spokesman and representatives of different factions appear daily in the media vowing to oppose the government line.

Reiterating his intention to serve his full five-year term and then retire from front-line politics, Prodi said he had nothing to lose by sticking to his policy priorities of keeping down the deficit and spurring growth.

But he said he would not be able to ensure growth and social welfare without the backing of his coalition, as well as the Italian public at large.

''If the country has the social conscience on all this we can move ahead, if not, someone else should come forward,'' he said.

REUTERS LPB DS1445