After years of debate,Venice's engine finally started churning as the city's mayor Massimo Cacciarisigned a deal to build a new festivalstructure in the Lido's former hospital.

Cacciari sealed a deal onThursday allowing Venice to sell off the Ospedaledel Mare hospital to real estate developers, provided that at least $120m(100m Euros) are used to build a new Palazzo.

Cacciari says around Euros $60.2m- $120.4m (50-100m Euros) will now be needed to convert the hospital into thefestival's new site. Venice hopes the new palazzo willbe ready in 2009 or 2010.

Public funding is unlikely,since Silvio Berlusconi's government has been drastically cutting back fundingto the arts for years, and national elections are taking place in April.

"It would beunthinkable right now to get the new palazzo built with public funding,"Cacciari admitted. "But the hospital area's conversion plan is attractingprivate investors. We want to create a real city of cinema, similar to Rome's Auditorium, which hasbecome our competitor," he said.

The futuristic Rome Auditorium,which was designed by architect Renzo Piani, will host the capital'sfirst film festival in October.

The Roman challenge was thesubject of heated discussion at the last Venice Film Festival, where manypredicted a concerted challenge from the newcomer.

The 9-day festival, to beheld from October 13th-21st, 2006, will have a budget of$10.5m (9m Euros) - around the same as Venice.

In the meantime, as itawaits its new Palazzo del Cinema, Venice faces the pressing issue ofwhether it will be able to soon hold a market in a temporary structure on the Lido.

With deal-making soft inVenice last year and many industry executives flying off to Toronto to signdeals after a weekend on the Lido, artistic director Marco Mueller hasrepeatedly warned that 2006 will be his last year in Venice - unless theBiennale finally agrees to establish a proper market.