Italian Prime Minister Silvio Berlusconi resigned on Wednesday but said he had backing to form a new administration with the same allies, in a move designed to avert snap elections and revive his flagging political fortunes.

"I accept the challenge of forming a new government," he told parliament, bowing to demands from two coalition partners who threatened to withdraw their support unless he resigned and formed a new government. They also demanded a new policy agenda after a heavy defeat in a regional ballot two weeks ago.

He said he had assurances from the four main parties in his center-right coalition, including the rebel Union of Christian Democrats (UDC) and right-wing National Alliance (AN), that they would back his new administration.

"No one has planned a change of parliamentary majority."

The crisis had threatened to tear the coalition apart as the UDC and AN demanded a reduced role in government for the populist Northern League, which wants more autonomy for the rich north of the country.

Speaking with reporters later, Berlusconi said he was planning only a few changes to his cabinet. A senior government politician told Reuters that the industry, health and transport ministers were likely to lose their jobs in the reshuffle.

None of the ministers are members of the Northern League but a "rebalancing" of the coalition could still be achieved if the posts, currently held by Berlusconi's Forza Italia (Go Italy) and non-affiliated technocrats, were to go to the UDC and AN.

Under the terms of the Italian constitution, a prime minister is obliged to resign if he makes major changes to his cabinet.

Berlusconi put a brave face on the end of his ambition to become Italy's first prime minister in post-war history to lead the same administration for a full five-year term.

"With your confidence and your support, we have written important pages in our country's history," he told a packed upper house (Senate). "With your confidence and your support I am sure we will write many more."

Uphill struggle

The turmoil was sparked when the UDC quit the cabinet last week. On Tuesday the National Alliance, led by Foreign Minister Gianfranco Fini, threatened to do the same unless Berlusconi changed his program and formed a new government.

Berlusconi's Senate speech met all Fini's demands.

"It's my intention to renew our program, to raise our efforts to raise the buying power of families, to support our firms and to give decisive support ... for the South," he said.

Assuming the prime minister can heal the wounds in his fractious coalition he still faces a huge uphill struggle to improve his government's standing and try and win the next general election slated for spring 2006.

The economy has barely grown since he took office in 2001, consumer and business confidence are low and opinion polls show a clear lead for the center-left opposition led by former European Commission President Romano Prodi.

But political analysts said Berlusconi, a renowned political fighter, should not be written off.

"I think this crisis is behind him, although the way it went suggests he is no longer able to impose his will on the rest of the coalition," said Franco Pavoncello, professor of politics at Rome's John Cabot University.

"He is weak but he is not dead yet, the center-left is only about five points ahead in the polls and a year gives him a long time to close that gap."

Berlusconi said after tendering his resignation that President Carlo Azeglio Ciampi would hold formal consultations with political parties on Thursday and Friday to hear their proposals for the formation of a new government.

If, as Berlusconi says, he has the support of all his partners, the consultations will be a mere formality.

But it was not clear when Berlusconi would be able to form a new government and put it to a parliamentary vote of confidence.

Although he has lost his chance of being the first Italian to lead the same government through a whole legislature, Berlusconi's government nonetheless holds the modern record for longevity -- lasting just over 1,400 days.

(Chinadaily.com via agencies April 21, 2005)