Italian Premier Romano Prodi on Friday found himself at the centre of a deepening row over Italian telecommunications giant Telecom Italia .
The centre-left leader was attacked by the opposition and several allies after it emerged that a close adviser, Angelo Rovati, had written a secret report recommending that the state buy back part of debt-laden Telecom .
Prodi denied on Thursday that the government had anything to do with the 28-page analysis, which Rovati gave to Telecom chief Marco Tronchetti Provera on September 5 and which was leaked to the press this week .
Rovati also insisted that he had acted independently .
But some opposition MPs called for Rovati's resignation and even Prodi's, while several lawmakers in the nine-party governing coalition agreed with the centre right that the premier should clarify the matter in parliament .
The Telecom saga erupted on Monday when Tronchetti Provera announced his group would split its mobile-phone unit TIM and its fixed-line network into two separate companies .
The plan stunned the business world and the government since TIM was fully integrated into Telecom Italia only last year. Moreover, Tronchetti Provera, who also heads tyre group Pirelli, has always been a strong supporter of 'convergence' - the theory that telecom groups should integrate their mobile, fixed and broadband activities .
Analysts immediately speculated that Tronchetti Provera was preparing ground for a TIM sell-off in order to reduce Telecom's crippling debt burden of 41.3 billion euros, a sum which is almost equal to the group's estimated market value .
Tronchetti Provera, who took over Telecom in 2001, denied that offers had been made for TIM, saying that "we only want to manage our assets in the best possible way and be more flexible... We are not in contact with anyone" .
But Prodi expressed surprise and alarm on Tuesday, saying he knew nothing of the new plan and that Tronchetti Provera had failed to inform him during a meeting earlier in the month in which they discussed Telecom strategies .
"The government has the right to know," the premier added, stressing Telecom's importance to the Italian economy .
Several ministers said they feared TIM would end up in foreign hands, like Italy's other mobile phone operators, and called on the government to block the restructuring plan .
Leftist allies went further by saying that Telecom should be renationalised .
Telecom was privatised in 1997 but the government still holds veto powers over the ex-monopoly's corporate decisions .
Prodi repeated in a statement on Wednesday that he knew nothing of the plan to separate Telecom and TIM .
The premier said Tronchetti Proveri had informed him during meetings on July 19 and September 2 of a possible partnership with Rupert Murdoch's News Corporation .
Prodi said his only comment was that it was important that Telecom remain under Italian control .
The publication of the Rovati report on Thursday triggered accusations that Prodi knew more than he had let on about Telecom's plans .
The report offers several restructuring options to help solve Telecom's debt problems. One of them is that Telecom split itself from TIM and that the Treasury's savings and loans division then buy control of the fixed-line entity .
Rovati said the operation would reduce Telecom's debt by 17-20 billion euros and would cost the Treasury nothing since the investment would be offset by 5-7 billion euros from the capital gains on Telecom plus 120-170 million euros per year in profits .
The report stressed the need to stave off the risk of foreign takeover bids .
Rovati said after the report was leaked to the papers that "I alone am responsible for the project. The government knew nothing about it" .
PRODI REFUSES TO REPORT TO PARLIAMENT .
Prodi refused opposition demands on Friday that he report to parliament on the case .
"What? Are we crazy? There are no new elements to the case. Let's leave aside the rumours, of which there have been too many, and wait for the facts to talk," the premier said from China where he is on an official visit .
Communications Minister Paolo Gentiloni addressed the Rovati report in a TV interview, saying that "the government has never discussed and has no intention of carrying out any plans of this kind. Rovati has made it clear that it was a personal initiative" .
But the spokesman of opposition chief Silvio Berlusconi, Paolo Bonaiuti, commented: "Prodi says the facts will speak for themselves. But the facts are that the (Rovati) report was prepared at the premier's office and handed to Tronchetti Provera. Democracy demands that Prodi address parliament on this scandal" .
Isabella Bertolini, a top member of Berlusconi's Forza Italia party, said that "Prodi has knowingly lied, unless he has an advisor who fails to inform him about what he (the advisor) is doing" .
The rightist National Alliance accused Prodi of interfering in the private market and said he could have broken the law .
"This is a disturbing affair which affects the bourse and could have judicial consequences. We are talking about insider trading and other serious violations," it said .
Rome prosecutors, meanwhile, said they were following the case closely .
The premier also faced fire from his own coalition .
The Radical party said the premier's explanations were "insufficient" and that the whole affair was affecting the financial markets .
Telecom fell 2.5% to 2.17 euros in morning trading in Milan while Pirelli shed 3.16% to 0.71 euros .
In order to help buy Telecom in 2001, Tronchetti Provera used 4.4 billion euros of Pirelli cash and has since been selling Pirelli assets to help pay off debts stemming from the operation .
Before the Telecom investment, Pirelli shares were worth more than three euros while Telecom shares were trading at around four euros .
