Italy awaits president's word to end political impasse

ROME (AFP) - Italy was in suspense on Saturday ahead of President Giorgio Napolitano's expected proposal for who should lead the eurozone's third-largest economy after elections that left no clear winner.

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

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

Mr Berlusconi has said a cross-party deal is the only viable solution.

The other option outlined by analysts would be a government composed 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 said it will not support a government with party politicians but has left open the possibility of backing a technocratic government and backing 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 Mr Monti has managed to implement have, however, kept the financial market wolves at bay so far and stocks and bonds have been relatively muted despite the political crisis.

Mr Monti will remain in charge until a new government is formed, although he has been governing with interim powers since December when lawmakers from Mr 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 per cent this year, and some analysts predict the end result could be even worse.

Despite winning praise abroad for his reforms, Mr Monti came a distant fourth in the February 24-25 polls at the head of a centrist coalition as the social cost 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 political crisis has had a relatively muted effect on the financial markets, a race is on to resolve it by Tuesday, when the markets reopen after the Easter holiday.

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