03/28/2013 02:59 pm ET Updated May 28, 2013

Italy Government Crisis: Bersani Fails To Form Coalition, New Technocrat PM Possible

By James Mackenzie and Barry Moody

ROME, March 28 (Reuters) - Centre-left leader Pier Luigi Bersani has failed in his attempt to find a way out of Italy's intractable political crisis and President Giorgio Napolitano will now try to find another solution, the president's palace said on Thursday.

Bersani reported back to Napolitano on Thursday night after being given a mandate almost a week ago to see if there was a way to form a government after an inconclusive election in February which plunged Italy into deadlock.

A statement from Napolitano's office said Bersani had told him his talks with other parties "did not have a successful result."

The president would personally examine other possible solutions without delay, the statement said. Officials said Napolitano would start a new round of consultations with political parties on Friday morning.

Bersani said he had told Napolitano, 87, of the problems he had faced in the negotiations, in which he failed to reach any agreement with either of the other two main forces in parliament - Silvio Berlusconi's centre-right and Beppe Grillo's populist 5-Star Movement.

A spokesman for Bersani's Democratic Party (PD) said he had not given up of forming a government but the centre-right People of Freedom (PDL) party poured scorn on the centre-left leader and said he had wasted a month in a fruitless search for support.

The centre-left fell short of the majority Bersani would need to govern after last month's election and made no headway in five days of talks with the rival parties aimed at winning sufficient support for a vote of confidence.

Napolitano has said he opposes a snap new election to end the impasse but his options are severely limited. They include naming an outsider to head a technocrat government like that of outgoing Prime Minister Mario Monti or a cross-party political coalition.

The stalemate in the euro zone's third-largest economy has been watched with growing alarm across Europe as the crisis in Cyprus increased concern about the renewal of market turmoil that would threaten the stability of the currency bloc.

On Thursday, the main indicator of market confidence, the spread between Italian 10-year bonds and their safer German counterparts widened to 350 basis points, some 30 points higher than the level seen before the Feb. 24-25 election.


Bersani had expressed optimism up to the last minute that he could overcome the difficulties but appeared to have run into a wall, particularly in his overtures to Grillo, whose movement says it will not support a vote of confidence in a government led by either the centre-right or centre-left.

Bersani has in turn rebuffed demands by Berlusconi that he form a broad left-right coalition, saying the scandal-plagued media magnate was too discredited to deal with.

Mindful of the risk of instability, Napolitano had insisted Bersani obtain firm guarantees of support from the other parties for a vote of confidence in parliament before he would agree to give him a government-forming mandate.

Bersani had tried to win support for an agreed list of major reforms but was never able to win guaranteed backing from a sufficient number of members of parliament.

Prospects that Monti may be asked to remain in office have faded since Foreign Minister Giulio Terzi quit this week in a shock move that showed the tensions in the caretaker government.

But Bersani's struggle to reach an agreement showed how hard it will be even for a new technocrat cabinet to win support in the divided parliament, increasing the chances of a snap election.

However an election can only be called after parliament elects a successor to Napolitano, whose term ends in mid-May. Constitutional rules prevent a president from dissolving parliament during the final months of his mandate.

Even this task is politically fraught because Berlusconi wants to pick the new head of state, something Bersani rejects.

Underlining the challenges for the next government, a senior Bank of Italy official and the head of Italy's statistics agency ISTAT both said the government's latest economic forecasts may still be too optimistic, even after being sharply cut last week.

Last week the government said the economy, in its longest recession for 20 years, would contract 1.3 percent this year, compared with a previous forecast of a 0.2 percent shrinkage.

However, ISTAT head Enrico Giovannini told a parliamentary committee hearing on Thursday the result may be worse than that with no recovery until the end of the year or early 2014.

The lack of a government has increased concern that the slump will only get deeper.

"We need effective and credible economic policies to interrupt the recessionary spiral," Daniele Franco, a top central bank economist, told the committee.



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