Center-left leader Romano Prodi claimed a knife-edge victory in Italy's general election on Tuesday, but Prime Minister Silvio Berlusconi's allies disputed the result and demanded a "scrupulous" check of the count.

Italy's opposition leader Romano Prodi speaks during a rally by his centre-left coalition in central Rome April 11, 2006. Prodi said on Tuesday he still did not know the outcome of Italy's general election, but said he remained hopeful of victory. [Reuters]

Twelve hours after polling stations closed, Prodi declared that his broad coalition had secured a majority in both houses of parliament and promised to unify Italy after a divisive, acrimonious election campaign.

"We have won," Prodi told flag-waving supporters who had waited until the early hours in a Rome square as the count ebbed and flowed in the closest election in modern Italian history.

The Center-left said it was on course to win a one-seat majority in the upper house (Senate). In the lower house, official data showed Prodi had taken 49.81 percent of the vote to 49.74 percent for Berlusconi's House of Freedoms Alliance.

Under Italy's new electoral system, the ballot winners are automatically granted 340 of the lower house's 630 seats no matter how small their margin of victory in the popular vote, with the runners up getting some 277 seats.

However, Berlusconi's Center-right alliance contested Prodi's claim of triumph, saying it wanted to check reports that some half a million votes had been annulled.

"This is intolerable. What is this? A coup? It reminds me of South America. Auto proclamation (of victory) is constitutionally illegitimate," said Industry Minister Claudio Scajola, a member of Berlusconi's Forza Italia (Go Italy) party.

The close race revealed deep splits in Italy and raised the specter of chronic political instability in the months ahead.

Italy's two houses of parliament duplicate each other's functions and a government needs the support of both to take office and to pass laws.

A one-seat majority in the Senate would leave Prodi vulnerable to the demands of junior partners and would turn every vote into an effective confidence motion.

"We were on a razor's edge, but in the end victory was ours and now it is time to turn the page," said Prodi, who won a 1996 general election but only survived two years in office before being ousted by disgruntled communist allies.

But some of his supporters were clearly dismayed by the result, which was much closer than opinion polls and the exit poll had suggested.

"I don't understand why they are all dancing and jumping up and down. This isn't a victory," said Luigi Esposito, a Center-left voter in his 30s.

Labour Minister Roberto Maroni of the Northern League party said the ballot resembled the 2000 U.S. presidential election, which ended in a bitter recount battle in Florida.

"The level pegging is very similar to what happened in Florida. With one vote more or one vote less, you lose or you win," he said.

Official data said the Center-left won the lower house by just 25,224 votes. A check on all the spoilt ballots, as demanded by the Center-right, could open the door to a legal challenge of the result.

Berlusconi had trailed in the opinion polls for two years, but he fought a tenacious campaign, wrong-footing Prodi in the final week by promising to abolish an unpopular property tax.

Prodi's Center-left alliance, which stretches from Roman Catholic centrists to communists, expected to tap into voter unhappiness over the stagnant economy and rising cost of living.

However, Berlusconi painted his opponents as a tax-obsessed coalition that would bleed the middle classes dry.

If Prodi does take office, he will inherit the task of cutting the world's third largest national debt pile while trying to breathe new life into an economy that grew an average of 0.6 percent a year under Berlusconi.

The next government is not expected to take office for at least a month, with Berlusconi set to stay on in a caretaker capacity until parliament nominates a successor to President Carlo Azeglio Ciampi, whose mandate expires in May.

The president must name the new prime minister and Ciampi says he wants to leave the task to his successor.