· 2,600 troops to pull out in consultation with allies

Britain and the US were last night facing almost total isolation in Iraq after Italy's new prime minister, Romano Prodi, made it clear that he intended to pull out the third-biggest contingent in the military coalition at the earliest possible opportunity. Under Silvio Berlusconi, Italy was among the most enthusiastic supporters of the Bush-Blair line. But in his first policy speech since being sworn in on Wednesday, Mr Prodi was excoriating in his criticism of Anglo-American policy.

Unveiling his government's programme to the upper house of the Rome parliament, he caused uproar when he declared that the invasion of Iraq had been a "grave mistake" and branded the allied military presence an "occupation".
With some 2,600 troops on the ground, based at Nassiriya in the south, Italy's contingent in Iraq is the biggest after those of the US and Britain.

Rightwing senators whistled and jeered as Mr Prodi said: "We consider the war and the occupation of the country a grave mistake. It has not resolved - on the contrary, it has complicated - the security problem. In Iraq, terrorism has found a new base and new pretexts for terror attacks both inside and outside the country." The war, had "opened up a Pandora's box and risks causing a regional conflagration".

The departure of Italian troops from Iraq would further weaken a coalition that has been hostage to anti-war sentiment in Europe as well as financial constraints. Mr Berlusconi is only the most recent US ally in Iraq to be rejected by voters at home, continuing a tradition that began with the defeat of Spain's José María Aznar in 2004.

Ukraine withdrew all of its troops from Iraq at the end of last year, and Poland, which was once one of the largest military contributors, has also cut its contingent. Several other smaller forces have also been withdrawn.

Mr Prodi, a former EU commission president, said he intended to preserve Italy's good relations with Washington, and carefully avoided fixing a date for the pull-out. Holding to the letter of his centre-left alliance's electoral programme, he said the troops would come home "within a technically necessary timeframe" and in consultation with Rome's allies.

That caution was appreciated in Washington, where there was no direct response to his speech. A state department spokesman, Edgar Vasquez, said: "Mr Prodi has been clear that the decision on Italian troop deployments in Iraq will be taken in consultation with the Iraqi leadership and coalition partners. This is a responsible way to assist Iraqi people in their quest for security and democracy."

The previous, conservative, government had promised to withdraw by the end of 2006. But the tone of Mr Prodi's address was at odds with Mr Berlusconi's fervent Atlanticism and pointed to a speedy departure. Some of the more leftwing parties in his broad alliance, which made impressive gains in last month's election, are pressing for Italy's troops to be back by the summer.

Mr Prodi's use of the term "occupation" marked a radical departure from earlier official rhetoric. Faced with overwhelming public rejection of the US-led invasion, Mr Berlusconi did not contribute troops to the war effort but jumped at the chance to send a contingent after the fighting. It was defined as a peacekeeping force, but leftwing opponents repeatedly argued that Italy's soldiers and paramilitary Carabinieri were part of an occupying army.

Mr Prodi's choice of words in his speech to the senate yesterday was the latest of several indications that the balance of gravity in his administration lies well to the left of its leader.

Italy's misgivings over its presence in Iraq are by no means confined to the left. Last year, they surged into the open after US troops shot dead an Italian intelligence officer, Nicola Calipari, as he escorted a freed civilian hostage to Baghdad airport.

Altogether, Italy's involvement in Iraq has cost the lives of 36 people - 29 soldiers and police, and seven civilians. The latest victims, an army officer and two Carabinieri, died in a bomb attack last month.