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Suspense in Italy over bid to end political impasse

world Updated: Mar 30, 2013 15:54 IST

Suspense mounted in Italy on Saturday ahead of an expected announcement by President Giorgio Napolitano on how to resolve political deadlock following elections that left no clear winner.

"Mission Impossible", "Have Pity Please" and "Paralysis" read some of the headlines in the Italian press - more than a month after an inconclusive vote in the eurozone's third largest economy.

Several analysts said the 87-year-old Napolitano could resign - a drastic move that would give his successor greater leeway in ending the crisis, including by calling new elections.

The latest round of talks between political leaders ended on Friday with no solution in sight after the three main political forces proposed different visions for a future government.

"There is not even a point of contact between the three main parties," said Antonio Polito, a columnist for the top-selling Corriere della Sera daily.

Pier Luigi Bersani's centre-left coalition, which secured the most votes in the elections but failed to win a majority, ruled out an alliance with Silvio Berlusconi's centre-right grouping which came a very close second.

Berlusconi, a scandal-tainted billionaire tycoon who has been prime minister three times in a 20-year political career, has said a cross-party deal is the only viable solution.

The other option would be a cabinet of non-political figures like the outgoing one of Prime Minister Mario Monti, a former European commissioner drafted in after Berlusconi's 2011 ouster.

The anti-establishment Five Star Movement party has ruled out support for a political cabinet but has left open the possibility of backing a technocratic government and voting for laws on a case-by-case basis.

Italians fed up with austerity and politicians' perks voted in their millions for the Five Star Movement led by former comedian Beppe Grillo, which won a quarter of the vote and became Italy's single biggest party.

Developments in Italy are being closely watched by European capitals under similar pressures over budget cuts, as well as investors concerned that Italy could plunge back into the turmoil of the eurozone debt crisis.

The budget discipline and economic reforms that Monti has managed to implement have however kept investors calm so far and reactions on stock and bond markets have been relatively muted despite the political crisis.

Monti will remain in charge until a new government is formed, although he has been governing with interim powers since December when lawmakers from Berlusconi's People of Freedom party withdrew their parliamentary support.

Business leaders have warned that bickering politicians have no time to lose as Italy endures a painful recession and severe unemployment. The government is forecasting the economy will shrink by 1.3 percent this year, and some analysts predict the end result could be even worse.

Despite winning praise abroad for his reforms, Monti came a distant fourth in the polls at the head of a centrist coalition as the social cost of his measures has become increasingly evident with unemployment hitting record highs.

Most analysts predict that Italy will be forced to hold new elections within months at the earliest or a year at the latest, since stability is unlikely with the current three-way split of parliamentary forces.

While the crisis has not had wider repercussions for the eurozone yet, a race is on to resolve it by Tuesday, when the markets reopen after the Easter holiday.