Berlusconi gets new chance to lift Italy's economy

By Gavin Jones

ROME (Reuters) - Silvio Berlusconi's clear election win on Monday gives the conservative leader a third chance and a strong mandate to lift Italy's ailing economy, but he faces a daunting task.

Centre-left leader Walter Veltroni conceded defeat after projected results, which polling groups based on votes cast, gave the 71-year-old billionaire a lead of around 9 points and a clear majority of seats in both houses of parliament.

That contradicted exit polls which had given Berlusconi, who has already led two governments, a much narrower lead and briefly raised the specter of a hung parliament which had been widely feared before the vote.

Most analysts breathed a sigh of relief.

"It looks like Berlusconi will be able to form a strong government," said Luigi Speranza of BNP Paribas. "That is good news for the economy and a more favorable outcome for markets than the picture of instability that was on the cards after the exit polls."

While most of the euro zone is showing some resilience in the face of a surging currency and record high oil prices, Italy is close to recession, worsening a trend which has seen it underperform its main partners for at least a decade.

Romano Prodi's outgoing government last month slashed its growth forecast for this year to 0.6 percent and the International Monetary Fund sees growth at just half that rate.

While analysts agreed an inconclusive result would have been the worst scenario for Italy, some were still decidedly cautious on what Berlusconi could achieve to turn around the euro zone's third largest economy.

"His last government from 2001-2006 fell short of all its promises and did little in terms of economic reform despite having a comfortable majority in both houses," said Deutsche Bank's Susana Garcia.

"And then he had a clearer, more ambitious program than he does now and a more favorable international economic environment."

TOUGH INHERITANCE

Berlusconi will again have to rule with the right-wing National Alliance and the populist Northern League, which polled strongly, and some analysts said both would resist the kind of shake-up the hidebound economy is crying out for.

"I think Berlusconi's real problem is going to be holding together his coalition," said Gian Enrico Rusconi, politics professor at the University of Turin.

"The Northern League is a protectionist party. The National Alliance is a protectionist party. I don't think he will be capable of pushing through the reforms Italy needs."

Berlusconi has said his economy minister will once again be Giulio Tremonti, who oversaw a sharp deterioration in public finances during his previous term in office and was widely criticized for a series of amnesties for tax dodgers.