Rome: Centre-left leader Romano Prodi looked on course to beat Prime Minister Silvio Berlusconi in Italy's general election, exit polls showed yesterday, as voters punished the government for failing to revive the economy.

Prodi's alliance was set to win between 50 and 54 per cent of the vote in both the lower and upper houses of parliament, giving it a working majority in the two chambers, a poll by the Nexus research institute said.

Berlusconi's centre-right bloc was shown winning 45 to 49 per cent of the vote according to the poll, broadcast by state television RAI after voting ended in the two-day election.

"This is a result of historic proportions," said Massimo D'Alema, a former prime minister who is president of the largest centre-left party, the Democrats of the Left.

Under the terms of Italy's electoral system, the coalition which emerges ahead in the 630-seat lower chamber is automatically assigned a winner's majority of 340 seats.

In the 315-seat Senate, the winner's majority is assigned on a region-by-region basis.

Prodi's centre-left alliance, which stretches from Roman Catholic centrists to communists, had led in opinion polls for the past two years, benefiting from widespread voter discontent over the stagnant economy and rising cost of living.

Berlusconi, Italy's richest man who created the country's biggest media empire, dominated the often ill-tempered election campaign with a string of outbursts, gaffes and last-minute promises to cut taxes.

Centre-right leaders reacted cautiously to the exit polls, but one veteran politician from Berlusconi's bloc said they had no chance of regaining power.

"Undeniably the centre left has won and I think that it was the left part that won, more than the centre," said Francesco D'Onofrio, a senator from the centrist UDC party. Pollsters said Berlusconi's House of Freedoms coalition always faced an uphill battle to win over voters who felt the ever-optimistic premier had failed to deliver on pledges to revolutionise hidebound Italy and revive the economy. A poll by the Piepoli organisation suggested the prime minister's own Forza Italia (Go Italy) party had suffered a beating, with support dropping to 20-23 per cent from 29.4 per cent in 2001.

Prodi, 66, beat Berlusconi in a 1996 general election, but his government lasted only two years before it was brought down by disgruntled communist allies.

Critics say any new government headed by the occasionally prickly Prodi will suffer a similar fate because of the gaping ideological divide within his multi-party alliance.

Prodi will certainly have a smaller parliamentary majority than Berlusconi due to a change in the electoral system that was rushed into law late last year in a move critics said was designed to hobble any centre-left administration.

But Prodi insisted throughout the campaign that his coalition could survive a full five-year term, noting that unlike in 1996 his allies had signed up to a 289-page manifesto that will serve as a roadmap for any centre-left government.

The manifesto pledges to cut labour taxes, provide bigger handouts for families with children, reintroduce an inheritance tax, scrap plans to raise the age of retirement to 60 and launch a crackdown on tax evasion.

On foreign policy, Prodi has vowed a swift withdrawal of Italian troops sent to Iraq by Berlusconi, who is one of US President George W. Bush's closest allies in Europe.

If Prodi's victory is confirmed, he will inherit the unenviable task of cutting the world's third-largest national debt while trying to breathe life into an economy that grew an average of just 0.6 per cent a year under Berlusconi.

What Prodi has in store for Italians

Italians can expect a raft of changes if Romano Prodi, credited by exit polls with victory, fulfils the promises of his electoral programme. Here is a rundown:

Europe: Italy will become an active participant in European construction after five years of Euro-scepticism under Silvio Berlusconi. Prodi also steered Italy into the eurozone while prime minister from 1996-98.

United States: With Berlusconi gone, US President George W. Bush loses one of his staunchest allies in Europe. Berlusconi, a champion of economic liberalism and US leadership in the world, faithfully backed Bush's policies, including the 2003 invasion of Iraq, which was deeply unpopular in Italy.

Prodi will be far less aligned with Washington.

Iraq: Prodi has pledged to withdraw Italy's 3,000-strong contingent of troops from Iraq "as quickly as possible in concertation with the Iraqi authorities,""which may amount to the equivalent of Berlusconi's vow to pull them out by the end of 2006.

Israel: Prodi will replace Berlusconi's pro-Israel stance with Italy's traditionally more neutral position on the Middle East conflict.