Italian Prime Minister Silvio Berlusconi's Forza Italia party suffered a stinging defeat in its Milan powerbase in weekend local elections.

The results will increase pressure on Mr Berlusconi to give more power to his disgruntled allies at national level and will create fresh tensions within his fraught coalition.

Results published early yesterday showed Forza Italia and its centre-right partners lost control of the province of Milan in the weekend ballot, taking around 46 per cent of the vote against 54 per cent for the centre-left opposition candidate.

"How can one not read the victory in Milan as a political signal for the whole country," said Romano Prodi, leader of the centre left in Italy and president of the European Commission.

The election in Mr Berlusconi's home city was the most important in a series of local ballots held across Italy at the weekend that involved 22 provinces and 101 communes.

The centre left won 14 of the 22 provinces. "The alliance loses even in Milan," was the headline in la Repubblica newspaper, carrying an interview with an opposition leader predicting the "irreversible decline" of Mr Berlusconi.

The vote came just two weeks after support for Berlusconi's Forza Italia party crumbled in European elections, while backing for his coalition partners gained ground.

Jolted by that defeat, Mr Berlusconi indicated he was ready to bow to long-standing demands from some coalition partners for a greater influence over economic policy-making.

A hefty defeat in Milan, where he owns a soccer team and built up a business that made him Italy's richest man, will further weaken his hand and raise questions about his close ties with the junior government partner, the Northern League.

Mr Berlusconi has regularly appeared to favour the League during his time in government, much to the annoyance of his other two coalition allies, the National Alliance and centrist UDC party, which have strong roots in the south.

The Northern League initially stood against Forza Italia in the Milan vote and the National Alliance said this position had fatally damaged the coalition's cause. National Alliance leaders said the time had now come for Mr Berlusconi to treat all his allies in the same fashion.

"All the fatted cows have now been killed. From now on we are either all of us prodigal sons, or none of us," said Ignazio La Russa, national coordinator for the conservative National Alliance.

The weekend vote marked the end of a prolonged period of electioneering that brought Italian politics to a virtual halt, delaying important economic reforms at a time of weak growth and a climbing budget deficit.

Mr Berlusconi is expected to move fast this week to try to regain the initiative, introducing a mini-budget by July 3 to plug the budget holes and an overhaul of his government team to better reflect his allies' weighting after the elections.

Speaking to reporters on Sunday night in Istanbul, where he was attending a Nato summit, Mr Berlusconi brushed off suggestions his government was weakened. "I don't see why the government should not remain," he said.

Political sources say it is likely Mr Berlusconi will create a minister for the south, taking away some powers from Economy Minister Giulio Tremonti, who has clashed with Deputy Prime Minister Gianfranco Fini, leader of the National Alliance.

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