But by midday, the former economics professor and president of the European Commission Prodi claimed victory saying that he also expected to eek out a majority in the Senate as well by taking four of the still outstanding six seats elected by Italians abroad. That would cost Berlusconi's conservative allies their one-seat advantage they held early Tuesday. The final count in the lower house showed Prodi's center-left coalition winning control in the Chamber of Deputies with only 49.8 percent of the vote compared with 49.7 percent for Berlusconi's conservatives. The winning coalition is automatically awarded 55 percent of the seats according to a new electoral law, but the razor-thin margin is sure to make it hard for Prodi to claim a strong mandate to govern.

First exit polls on Monday had shown the left-wing opposition sweeping the conservatives out of power in both chambers, however, that lead quickly melted overnight.

Prodi told a press conference in Rome that he was confident he could still build a "strong" government that could last a full five-year term. "We have won," said the former and future premier, promising to make Europe "the center of the policy of my government" with "constructive relations with the United States."

But Berlusconi's camp hasn't conceded the election and has called for a recount in the lower Chamber of Deputies, where final results gave Prodi's coalition a lead of only 25,000 votes of some 38 million cast. "Such a narrow difference demands that there be a careful verification of the vote count," Berlusconi's spokesman Paolo Bonaiuti said according to the Associated Press.

Bitter campaign, stagnate economy

The two day vote, which began on Sunday and ended mid-afternoon on Monday, was the culmination of a tough election battle. Prodi's center-left alliance -- which runs the gamut from Roman Catholic moderates to communists -- had led in recent opinion polls. But Berlusconi also presented them with a major challenge in recent weeks by making promises to radically cut taxes. In the end, those voters disillusioned by Italy's stagnant economic growth who had lost faith in Berlusconi cast their ballots for Prodi.

Since the Senate and lower chamber of parliament have equal powers, any coalition would have to control both to form a government. Some center-left and center-right leaders have said that if neither side controls both houses, new elections should be called. And even if one coalition controls both chambers, it would find it extremely difficult to pass legislation with such a slim majority, returning Italy to instability after Berlusconi's record five years in power. Italy has seen 61 different governments since World War II.

Even if Prodi's center-left grouping manages to secure majorities in both houses, the election result will make it very difficult to pursue the kind of tough reforms Italy so desperately needs to spark growth and overhaul its moribund economy. "The center-left government will not be as strong as expected. This implies that it would be hard for the government to take important decisions," Exane BNP Paribas analyst Filippo Lo Franco told Reuters. Indeed, with a tiny majority and a multi-party coalition, even small parties can play kingmaker by withholding votes.

After a bitterly divisive campaign, Italians woke up on Tuesday morning to the prospect of an inconclusive election result potentially throwing the country into a period of political instability. First returns showed conservative Prime Minister Silvio Berlusconi's coalition holding a tiny lead in the upper house of parliament, the Senate, and Romano Prodi's center-left opposition winning the lower house by a miniscule margin.

And if the conservatives choose to contest the vote, the country could be in for a messy Italian version of the inconclusive US presidential election in 2000. The complicated situation is made worse by the fact that 85-year-old Italian President Carlo Azeglio Ciampi's term ends in mid May and according to the constitution he is not allowed to call for fresh elections in the final months in office.

Although the possibility of a so-called "grand coalition" with forces from both the left and right has been voiced by some politicians, it appears unlikely that such bitterly divided foes could cobble together a working government.

Voter turnout was 84 percent, but the split outcome left many Italians worried about the future. "These results mean the country is divided in two. There needs to be a provisional government for a few months then new elections," Marco Piva, a 49-year-old banker from Padua told the Associated Press. "This is the worst result that we could have had."

mry/ap/reuters