---- by PHILIP WEBSTER ----
MILAN (AFX) - Silvio Berlusconi, leader of the right-wing coalition party the House of Freedom, is expected to have a free hand in applying pro-EU and free market policies thanks to the weakness of his political allies, analysts said.
Berlusconi, who is the country's richest man and owns a media-to-finance empire, is also seen as a "natural ally" for the business community, which is counting on his efforts to cut the country's red tape.
Berlusconi's coalition obtained a majority in both houses of parliament in Sunday's general election.
Before the ballot, there was concern in the business community that Berlusconi would have to make concessions to its volatile North League partner, which has made virulent anti-EU remarks, and the post-fascist National Alliance (AN), which has supporters for state control of the economy, said Maurizio Pessato, responsible for opinion polls at the research institute PeopleSWG.
However, Berlusconi's strong endorsement by right-wing electors has given his Forza Italia party the authority to impose the agenda, analysts said.
A preliminary breakdown shows that Forza Italia has 189 seats in the 630-lower house, AN 96 and the League 30. Overall, the coalition has 367 seats.
Other coalition members include right-wing Catholics and Socialists.
The League faired badly in the elections, seeing its share of votes fall to 3.9 pct from 10.1 pct in the 1996 election, while Forza Italia's support rose to 29.4 pct from 20.6 pct.
Gian Maria Fara, president of the research institute Eurispes, said he is concerned by the League's severe defeat, as the party could be tempted to become more extremist as it may feel "it sold its soul without obtaining great results."
The electoral pact between Berlusconi's coalition and the League is seen as a key element in the right-wing's victory.
Because of the electors' loyalty to their parties, it was important to reach alliances to win the ballot, analysts said.
The pact with the League was seen as essential to win seats in North Italy, while the deal struck with the neo-fascist Tricolour Flame helped the right to win in Sicily.
Conversely, the ruling left-wing Olive Tree failed to reach a fully-fledged electoral pact with the Refounded Communists and the Italy of Values, a small party led by former prosecutor Antonio Di Pietro.
Nevertheless, the League is not expected to break away at an early stage in the parliament's five-year life.
"It would be political suicide," said Fara.
Theoretically, the House of Freedom could lose its majority in the upper house if the League pulls out, but analysts do not believe that the government is at risk, and could last five years.
The League has 17 senators out of the coalition's 177. The senate currently has 324 members (including nine life senators), putting the majority at 163.
The business community will expect Berlusconi to streamline the country's bureaucracy and legislation as well as improve infrastructure and increase flexibility in the labour market.
PeopleSWG's Pessato said the previous government made efforts to reduce bureaucracy, but Berlusconi is expected to be more determined to solve the problem.
He added that enacting reforms will be difficult and that part of the country could soon be disappointed by Berlusconi's efforts, a sentiment that the left-wing opposition could seek to exploit. However, Berlusconi is expected to retain the loyalty of his electors unless he loses his grip on the coalition, or introduces drastic policies that could lead to social conflict.