Italy's president declines to resign, will stay to deal with crisis

By Giselda Vagnoni

ROME (Reuters) - Italian President Giorgio Napolitano on Saturday ruled out standing down early to make way for new parliamentary elections, following the failure of attempts to form a government this week.

Napolitano, whose term ends on May 15, spoke after news reports suggested he might resign to get around constitutional provisions which prevent a president dissolving parliament and calling elections in the final months of his mandate.

The 87-year-old told reporters he would continue his efforts to break the deadlock since inconclusive elections last month that left no group able to form a government.

"I will continue until the last day of my mandate to do as my sense of national responsibility suggests, without hiding from the country the difficulties that I am still facing," he told reporters at his Quirinale palace.

He said he would ask two small groups of experts to formulate proposals for institutional and social and economic reforms that could be supported by all political parties.

But he acknowledged that he had limited scope to force the divided parties to find a way out of political situation that he said was "frozen between irreconcilable positions".

Napolitano met leaders of the main parties on Friday to try to find a way out of the stalemate, which has created deep uncertainty just as the Cyprus banking crisis has revived fears about the stability of the euro zone.

However with all of the three main groups in parliament clinging to entrenched positions that have prevented a majority being formed in parliament, hopes of a solution that would prevent the need to go back to the polls have faded.

Center-left leader Pier Luigi Bersani, whose party controls the lower house but does not have a majority in the Senate, failed to win enough support to form a government from any of the other parties during a week of talks.

He rejected demands by center-right leader Silvio Berlusconi for a cross-party coalition deal that would give the scandal-plagued former prime minister a share in power and the right to decide Napolitano's successor.

Both Berlusconi's group and the populist 5-Star Movement led by ex-comic Beppe Grillo have also ruled out a new technocrat government like the one led by outgoing Prime Minister Mario Monti, blocking what appears to be the only other option.

IRRECONCILABLE

With investors mindful of the 2011 debt crisis that brought down Berlusconi's last government, the gridlock has fed worries about Italy's ability to confront an economic crisis that has fuelled rising social tensions and disillusion with its political class.

Napolitano's pledge to stay on appears to rule out the threat of a power vacuum with weeks of uncertainty until new elections, which would have to be called within 70 days of parliament being dissolved.

He stressed that Prime Minister Mario Monti retained full authority at the head of a caretaker administration until a new government can be formed.

Whether or not that can happen, parliament will soon have to begin preparations to vote for a new president either to oversee the first steps of a new government or early elections.

The election of the head of state, by a joint sitting of parliament and representatives from the regions, is likely to cause another bitter fight between the three main blocs which have become increasingly hostile to each other since the election.

A person close to the situation told Reuters on Saturday that Napolitano had considered resigning and the apparently coordinated leak of his thinking to newspapers may have been a move to increase pressure on the parties to secure a deal.

With bond markets closed for the Easter break, investors have been left on the sidelines but a poorly received auction of mid- and long-term debt last week underlined the danger if the crisis drags on.

Italy has been in deep recession for more than a year, with record unemployment, especially among the young and a 2-trillion-euro ($2.6-trillion) public debt that is dangerously exposed to swings on international bond markets.

Economy Minister Vittorio Grilli, responding to questions about market rumors of a ratings downgrade, told reporters on Thursday he had no knowledge of any imminent decision by Moody's to cut Italy's sovereign debt rating.

Moody's already rates Italy only two notches above "junk" grade, partly due to the uncertain political outlook.

(Writing by James Mackenzie; editing by Barry Moody)

Source: http://news.yahoo.com/italy-president-could-resign-allow-election-source-083108238--business.html

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