A resurgent trash crisis in Naples and squabbling over immigration pose challenges to newly elected Prime Minister Silvio Berlusconi as he finalises a sweeping security and economic reform package.

Berlusconi is moving his cabinet to the troubled port city of Naples on Wednesday to agree on the reforms, the first major initiative of his conservative government since it came to power last month.

The prime minister promised during the election campaign he would base his government in the southern city instead of the capital Rome to resolve the rubbish crisis.

The package, according to media reports, may include calling in the army to help clear away Naples' garbage and reimposing border checks to stem illegal immigration, despite Italy's membership in the European Union passport-free Schengen Zone.

Berlusconi's attorney, Niccolo Ghedini, complained on Sunday that a bid to make illegal immigration a custodial offence was foiled when a party inside Berlusconi's coalition, the National Alliance, objected.

Ghedini said the cited concerns were that Italy would be seen as "excessively severe in European circles". He said he thought the measure would have been a good deterrent.

"We are very different than other countries ... We're the door to the Mediterranean and we need to defend ourselves."

Europe's leading human rights watchdog and Spain both expressed concern last week over episodes of xenophobia and violence against immigrants in Italy.

Italian police were forced to evacuate illegal Roma camps in Naples after local people, angry at a suspected baby-snatching incident involving a 17-year-old Roma girl, set fire to Roma shacks repeatedly during the night. Nobody was injured.

Il Giornale newspaper, owned by Berlusconi's brother, cited a survey showing most Italians wanted to expel unemployed Roma, known in Italy as "nomads". Some 66.5 percent also said they favoured DNA tests and fingerprinting of all Roma for a census.

HERE COMES THE ARMY?

Naples, a symbol to many Italians of the country's inability to tackle corruption, organised crime and unemployment, again made headlines on Sunday for its inability to clear rubbish. Residents set putrid piles of garbage ablaze, some of them blocking streets.

The trash problem - the result of Naples' dumps being full - has been blamed on years of weak governance and organised crime.

Berlusconi was expected, according to one media report, to turn to the army to help restore order in Naples and could create secret trash dumps, presumably so citizens won't protest when refuse goes to their neighbourhoods.

The trash, and illegal tips of household and hazardous waste run by the local mafia known as the Camorra, are blamed for illnesses in local children and carcinogenic dioxins that were found in buffalo-milk mozzarella cheese earlier this year.

Defence Minister Ignazio La Russa said he also favoured calling in the army to join anti-illegal immigrant police patrols. He told Il Giornale their experience in foreign peacekeeping missions had prepared them.

"Today the army is professional and has concrete preparation. In Afghanistan, Iraq and Lebanon policing was carried out in much more difficult situations," La Russa said.

Also on Wednesday, Berlusconi's cabinet is expected to approve tax cuts that were at the heart of his campaign, including eliminating the tax on a primary residence.