Italy in New Talks to Break Government Deadlock


Italian political leaders began a new round of talks on Friday after leftist Pier Luigi Bersani failed to form a government following inconclusive elections in the eurozone's third-largest economy.

President Giorgio Napolitano met first with Silvio Berlusconi and his center-right coalition, as European capitals and financial markets watched warily amid renewed turbulence in the eurozone.

"In the name of rationality and in the interest of the country we must find a way to govern together as a coalition," former premier Berlusconi said after the talks.

"We believe an agreement can be found," the billionaire tycoon said, adding that he would back a coalition made up of the left, right and center.

Italy's main business daily Il Sole 24 Ore issued a stark warning to bickering politicians with a front-page headline reading: "Stop the Games".

Editor Roberto Napoletano warned of a "political vacuum" even as the country faced an economic emergency, adding: "There is no time to lose."

Pierluigi Battista, a columnist for the Corriere della Sera daily, said: "The main political forces have to choose whether to commit to a very tough challenge or jump back into another campaign".

"The next few hours will tell," he said.

Bersani's center-left coalition secured the most votes in the February 24-25 elections, winning a majority in the lower house of parliament but not in the upper house -- with Berlusconi's center-right a very close second.

Napolitano asked Bersani last week to try to form a government, but the ex-communist failed Friday in his attempt to woo lawmakers from the Five Star Movement, an anti-establishment party.

Bersani has ruled out a coalition government with his arch-rival Berlusconi, a scandal-tainted 76-year-old billionaire tycoon who has served as prime minister three times in a tumultuous political career spanning two decades.

Analysts said a variety of scenarios were possible.

One option is that Napolitano will nominate a prime minister candidate from outside the party political sphere -- an arrangement similar to the one that brought Mario Monti to power in 2011.

A former European commissioner, Monti kept public finances in check and launched key reforms but was punished at the ballot box by widespread opposition to his austerity measures.

Another possibility is that Napolitano could try to push through some kind of right-left coalition.

Meanwhile a poll released by the SWG institute on Friday showed that, should Italy return to the ballots, voters right across the political spectrum would support Florence mayor and center-left star Matteo Renzi for premier.

Renzi lost a bid to become Democratic Party leader last year, but many within the party say the center-left may have done much better at the elections under his leadership.

Any new government would need to win confidence votes in both houses of parliament.

Most analysts predict that Italy will be forced to hold new elections within months at the earliest, or one or two years at the latest, since any government is unlikely to be stable with the current three-way split of parliamentary forces.

The debt-laden country is mired in its longest recession in 20 years and unemployment has spiraled to record highs.

Monti's cabinet will remain in place until a new government is formed, although it has effectively been operating with interim powers since December.

The political instability has had a relatively muted effect on the markets and investors so far.

"The country is lucky that the Monti-led government was able to carry out bold measures, particularly on the fiscal front... Anything less would likely now have caused serious challenges," UniCredit research economist Loredana Federico said in a note.

"So long as Italy does not undo any significant part of the Monti reforms, markets should remain relatively stable until the political uncertainty has been addressed," she said.

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