Italy set for decision on new government

Italy's President Giorgio Napolitano said he will hand out a mandate for the formation of a new government today in a bid to break a deadlock created by elections last month, but the identity of the possible prime minister is still a mystery.

The centre-left, led by ex-communist Pier Luigi Bersani, won the February 24-25 elections but failed to secure enough votes in the upper house for the majority it needs to govern.

The deep division between political parties over how to proceed has revived fears Italy could plunge back into the debt crisis, just as a bitter standoff over a bailout for Cyprus intensifies.

Napolitano, who has a steering role in the current crisis, has hosted two days of talks this week with representatives of all the parties in parliament to try and find consensus.

Most analysts say Bersani will probably get the mandate but may fail to garner a majority -- in which case there could be a technocratic government similar to the outgoing one of Prime Minister Mario Monti, a former EU commissioner.

Another possibility being touted is a cabinet that is not led by Bersani but composed of both political and non-political figures with a limited agenda to deal with urgent economic issues.

Candidates mentioned by Italian media in recent days to lead such a cabinet have been: Pietro Grasso, a former anti-mafia prosecutor and Senate speaker; Fabrizio Saccomanni, the director general of the Bank of Italy and Interior Minister Anna Maria Cancellieri.

Whatever government may be formed, there will have to be early elections to resolve the deadlock possibly within months and after the reform of a widely criticised electoral law, analysts say.

In a surprise move yesterday after talks with Napolitano, Bersani appeared to indicate a willingness to work with rival Silvio Berlusconi's centre-right and suggested his party could back a cabinet led by someone other than himself.

The demand for political stability came not just from Italians 'but from Europe, which is attentively and anxiously watching us', he said.

Bersani had previously excluded a grand coalition with Berlusconi a scandal tainted former prime minister involved in several court cases and it would prove hugely controversial among leftists.

'The only solution to avoid returning to the polls this summer and having another sterile election campaign is to prioritise the most urgent measures to help the country breathe again,' said Mario Calabresi, editor of La Stampa daily.