Silvio Berlusconi was on the brink of staging the most extraordinary escape of his colourful five-year reign as Italy's Prime Minister this evening as results of the country's bitterly-fought general election went down to the wire.

An early flurry of exit polls suggested a narrow victory for his opponent Romano Prodi's centre-left coalition. But a later round of projections based on more detailed results and polls suggested that Signor Berlusconi's alliance had secured 158 seats in the upper house, the Senate, to 151 for Signor Prodi.

Meanwhile, projections based on 44 percent of the votes counted gave Signor Berlusconi’s forces 49.9 percent of the 630-seat lower house compared to 49.6 percent for Signor Prodi’s bloc. The complicated proportional representation system introduced by Signor Berlusconi in December means it is not possible to convert percentage points into seats.

Richard Owen, The Times' Rome correspondent, said: "The picture is one of confusion. The results are neck and neck, changing almost by the minute, but Signor Berlusconi is still in a position where he could win."

Outside Signor Prodi's campaign headquarters near Rome's Trevi Fountain, the atmosphere among supporters slumped from initial celebration to subdued disbelief as initial predictions of a close victory for their candidate were superceded by fears that he had once again turned a comfortable lead at the outset of an election campaign into defeat.

There was no immediate reaction from Signor Berlusconi but at his party headquarters on the improbably named Via dell'Umilita - Humility Street - a spokesman said. "The game isn't over until it's over."

Commentators agreed only that the result was too close to call.

The result will be closely followed at Westminster because of corruption allegations against both Signor Berlusconi and David Mills, husband of Tessa Jowell, the Culture Secretary. Mr Mills denies an accusation by Italian prosecutors that he was paid $600,000 by the Italian mogul for withholding evidence in two earlier trials.

Silvio Berlusconi has already made history as the first Italian Prime Minister to serve a full term since the Second World War but, with defeat looming, rushed through a new electoral law last December to return Italy to full proportional representation.

That means that whatever the final official result later tonight, the victorious grouping will have only the narrowest parliamentary majority and Italy could soon return to the days of revolving-door governments.

Signor Prodi lasted only two and a half years before being brought down by a single vote in his last term as prime minister. Since then the former economics professor has served as president of the European Commission, during which time his main achievement was the introduction of the euro.

Signor Berlusconi began the campaign trailing by as much as 20 percentage points in the polls, but has used his personal charisma and exuberant campaigning skills to recapture ground from "Il Professore".

A staunch US ally, Signor Berlusconi, 69, founded a business empire that expanded to include Italy’s main private TV networks, the Milan soccer team, as well as publishing, advertising and insurance interests.

He leads an often squabbling coalition of his own Forza Italia party, the former neo-fascist National Alliance, pro-Vatican forces, and the anti-immigrant Northern League.

Signor Prodi, 66, leads a potentially unwieldy coalition of moderate Christian Democrats, Greens, liberals, former Communists and Communists.

But one divisive issue - Iraq - was largely deflated before the campaign began, when Signor Berlusconi, President Bush's strongest ally in continental Europe, announced that Italy’s troops there would be withdrawn by year’s end.

The key battleground in the election has been the economy and Signor Berlusconi's failure to jumpstart growth over the past five years. Critics say that he has been more concerned with using his comfortable parliamentary majority to push through laws to protect his business interests and help him with his long-running legal problems.

But while voters seem preoccupied by economic worries, neither candidate seems to have much of a recipe for turning things around.

Signor Berlusconi has promised to abolish a homeowner’s property tax, while Signor Prodi said that he would revive an inheritance tax abolished by Signor Berlusconi, but only for the richest. He also promised to cut payroll taxes to try to spur hiring

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