By Stephen Brown
ROME (Reuters) - Exit polls put media mogul SilvioBerlusconi ahead on Monday in Italy's parliamentary electionbut suggested he was uncertain of winning the upper housemajority he needs to steer the country through an economicdownturn.
Exit polls are not always reliable in Italy. One survey forSky TV after voting ended gave the conservative leader a 2percentage-point lead over centre-left rival Walter Veltroni inthe lower house and a 3-point lead in the upper house.
A second poll for state television also put the 71-year-oldmedia magnate ahead in both chambers. The exit polls have amargin of error of two percent.
Political analysts said this could translate into a weakgovernment under Berlusconi, who is seeking a third term asprime minister, or even a hung parliament if 52-year-oldVeltroni managed to take control of the Senate.
"At the moment we're looking at a hung parliament, or anon-working majority," said politics professor James Walston atthe American University of Rome.
Berlusconi has vowed to cut Italy's public debt, trim taxesand liberalise the highly regulated services sector. But manyItalians fear political instability will prevent the nextgovernment reviving an economy on the brink of recession.
"That kind of government will find it almost impossible topass the structural reforms Italy needs, especially in such adifficult international economic environment," said DeutscheBank economist Susana Garcia.
Shares in Berlusconi's Mediaset, Italy's largest privatebroadcaster, were down 1.32 percent on a generally weak Milanstock market.
But exit polls failed to predict accurately the outcome ofthe last parliamentary election in 2006 and do not indicate thefinal balance of power in the Senate, where seats arecalculated on a regional rather than national basis.
A clearer picture should emerge from pollsters' projectionsfrom 5 p.m. (4:00 p.m. British time) of who will lead Italy's62nd government since World War Two and guide the fourthlargest economy in the European Union.
THIRD TERM
Berlusconi, who was prime minister for seven months fromApril 1994 and from 2001-2006, had been forecast by opinionpolls to secure a majority in the lower house. The Senate racewas always bound to be closer due to the complex voting system.
Romano Prodi, who beat Berlusconi in 2006, resigned inJanuary 20 months into his five-year term after his narrowmajority evaporated and his coalition collapsed.
Prodi's successor as leader of the Democratic Party, formerRome Mayor Veltroni, put up a stiff challenge to Berlusconi,who dominates Italy's media via his company.
Some of Italy's 47 million voters complained there waslittle to choose from between the two platforms.
Both pledged to reduce public debt -- the third highest inthe world in absolute terms -- but also cut taxes to boostspending and growth, which the International Monetary Fundexpects to slow to just 0.3 percent this year.
Up to a third of voters were undecided until the lastminute and the nation went to the urns in a despondent mood,tired of the squabbling politicians and chronic politicalinstability.
"I voted, but without any enthusiasm," said Massimo Rossi,47, sipping a cappuccino in a Rome cafe. "Whether Veltroni orBerlusconi wins, I see little changing in this country. I havelittle hope in Italian politics."
The flamboyant Berlusconi, who also owns AC Milan soccerclub, stumbled at times in the campaign, arguing with the hostof a TV debate, saying the left had "no taste in women" andinsulting soccer player Francesco Totti for backing a rival.
(Editing by Timothy Heritage)
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