ROME (AP) | 12/28/2006 03:07 PM

Prime Minister Romano Prodi vowed Thursday to deliver ‘’shock therapy” to spur growth in Italy after years of a sluggish economy, outlining an ambitious 2007 agenda he hopes will reverse his decline in popularity.

Prodi said his center-left government plans to remove bureaucratic hurdles to allow companies to be set up in one day, attract more foreign investment, and unveil a new environmental policy and energy savings scheme.

Liberalizing sectors of Italy’s rigid industry is also high on his agenda, Prodi told a news conference.

”No area can be protected from competition,” he said.

”We are applying, and we’ll do so in the future, shock therapy to the country’s productive system,” he said, adding ”2007 will be the year of the turnaround.”

Prodi, who took power after winning April elections, said a pension reform that has raised the prospect of massive confrontation with Italy’s powerful unions and possibly a strike will not be harsh. The reform is seen as a major test for his ruling majority.

Prodi offered few details about how his government will implement his agenda because officials are expected to work them out during a gathering in the southern city of Caserta next month.

But with an unwieldy coalition and slim majority in parliament, Prodi faces a tough challenge. Opposition politicians were quick to label the government’s agenda as unrealistic Thursday.

”Lying, lying, lying!” said Roberto Calderoli, a senator with the right-wing populist Northern League party. ”The 2007 that Prodi foresees represents a sort of ‘Alice in Wonderland.”’

Prodi has seen his popularity decline in recent weeks, due largely to a budget passed by parliament that critics say relies too heavily on tax hikes and not enough on curbing public spending. The budget is aimed at bringing the Italian deficit to within 3 percent of gross domestic product by next year to meet European Union commitments.

Prodi has defended the measures as necessary to restart the economy, which grew 0.3 percent in the third quarter of this year. But even his allies have acknowledged mistakes and miscommunication in how the measures were presented to the public.

Prodi’s repeated appeals for profound reforms have yielded little in a country where most people are wary of change. Measures presented by his government this year to liberalize various sectors _ including law firms, taxi companies, pharmacies and bakeries _ were met with fierce protests. Some were eventually watered down.

Adding to Prodi’s difficulties, the ruling coalition is a varied group of parties _ ranging from hard-line Communists to Christian Democrats and anti-Vatican secularists _ that do not agree on many issues. An upcomi ng debate on what legal status to give to unmarried couples, including gays and lesbians, is expected to highlight the divisions.

”Tensions within the majority remain a negative factor for Prodi,” said Gianfranco Pasquino, a leftist political analyst.

Prodi insisted Thursday that his coalition is united when it comes to voting in parliament.

”We won the elections with this majority, and this majority is capable of taking decisions, and will be so in the future,” he said.

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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