Prime Minister Silvio Berlusconi presented a new Cabinet to Parliament yesterday in a bid to persuade sceptical Italians he can use his last year before a general election to boost the flagging economy.
The media tycoon was forced to resign temporarily last week by his own political allies who demanded he show Italians he was serious about addressing their concerns after electors punished his centre-right coalition at regional elections.
Adding to the pressure on the premier, Milan prosecutors announced yesterday they had asked a judge to put Mr Berlusconi on trial again for alleged corruption at broadcaster Mediaset, owned by his family business.
Mr Berlusconi, who created Italy's largest media empire, has stood trial for graft on at least seven previous occasions but has never received a definitive guilty verdict.
Undaunted by his legal battles, Mr Berlusconi presented Parliament with a new team and new strategy, stressing help for industry, families and the poor south. He faces confidence votes today and tomorrow he looks sure to win, but elections in a year that pollsters say he may lose.
In a speech to the Chamber of Deputies, Mr Berlusconi blamed external factors for Italy's weak economy, citing the introduction of the euro for pushing up inflation and its appreciation against the dollar for cutting exports.
In his final year in office, he promised "a few priorities" to boost confidence and the economy, including tax breaks for families and a €12 billion reduction in corporate tax over the next three years.
He also promised the long-overdue renewal of the public sector wage contract, which could be a threat to state coffers if the government offers a generous salary increase.
Mr Berlusconi also called on the centre-right to move rapidly towards the formation of a single party to end coalition bickering and present a united front for next year's election.
"We must all be proud of what we have achieved together... but now we must meet a higher challenge, we must join our ideals and values in a new common home," he said.
Waiting in the wings is Mr Berlusconi's rival, centre-left leader and former European Commission President Romano Prodi, hoping to build on success in this month's regional elections.
Opposition parties had called on Mr Berlusconi to use the speech to distance himself from a joint US-Italian report that the US military says will absolve its soldiers from responsibility for the "friendly fire" killing of an Italian secret agent in Iraq.
But Mr Berlusconi, whose standing has also suffered because of his support for the US-led war in Iraq, said he would not comment on the matter until the final report was published.
The shooting of Nicola Calipari as he was accompanying a released Italian hostage to Baghdad airport stoked anti-war feelings in Italy.
The government's room for manoeuvre is limited by a strained budget. Italy is set to revise down its 2005 growth forecast to 1.2 per cent, from the current 2.1 per cent, pushing its deficit past the European Union's three per cent of GDP limit.