Italy leftists suggests loose alliance to end deadlock

Italian left-wing leader Pier Luigi Bersani on Friday held out the prospect of forming a minority government based on a loose alliance in parliament following inconclusive elections, as Europe puts on pressure for a quick solution. "I am calling it a government of change, which I would take the responsibility of leading," the Democratic Party leader said in an interview with La Repubblica daily, warning that Italy's "governability (is) at risk". "Like all governments, it will ask for the confidence of parliament," he said. But Bersani rejected out of hand the possibility of a grand coalition arrangement with Silvio Berlusconi's centre-right forces, after a new anti-establishment party upset the traditional balance of power between Italy's right and left by winning big in the polls early this week. Bersani said the government he is proposing would have key objectives, including easing austerity measures, creating jobs, helping the poorest and cutting government costs -- echoing at least some of the demands made by the anti-establishment Five Star Movement. But since a Democratic Party-led coalition did not manage majorities in both houses of parliament, the new government would depend on the support of other parties in the upper house -- an arrangement that analysts have warned would prove "highly unstable" at a time when Italy is facing an acute economic crisis. Stefano Folli, editorialist for Il Sole 24 Ore business daily, said it would "hand over the government" to the whims of the populist Five Star Movement. It is unclear whether the Five Star Movement would support Bersani after its leader, former comedian Beppe Grillo, said his movement "is not going to give a vote of confidence to the Democratic Party or to anyone else". Not everyone in his movement agrees with this rejection, however. The party captured a quarter of the vote with a campaign that mixed advocacy on environmental causes and grassroots local issues with a crusade against political sleaze, drawing many austerity-weary Italians to its ranks. The party has spooked Europe with its promise to hold a referendum on the euro and cancel Italy's debts, prompting European leaders to urge Italy to stick to its fiscal commitments and form a government as soon as possible. A deputy from German Chancellor Angela Merkel's Christian Democratic Union (CDU) called Friday for Italy to leave the euro if it could not stick to EU rules after its inconclusive election. "If one can't succeed in persuading the people of a country that they have to stick to the commitments they have themselves signed up to in terms of how the common currency works, then you can't demand new elections from outside, but the country must return to its own currency," said Klaus-Peter Willsch. Markets were jittery in trading on Friday, with the Milan index plunging 1.58 percent -- the worst performer among major European stock markets. The technocratic cabinet of outgoing premier Mario Monti, who won praise abroad for his budget discipline and economic reforms but became increasingly unpopular at home, will stay in place until a new government is formed. A centrist coalition led by Monti came in fourth place, garnering far too little support to be able to cobble a majority in alliance with the left. Bersani meanwhile ruled out another possibility -- the formation of an emergency coalition with his long-time arch-rival Berlusconi -- saying: "The hypothesis of a grand understanding does not exist and will never exist". The scandal-tainted Berlusconi on Friday made an appearance at his appeal trial in Milan against a tax fraud conviction linked to his business empire. A verdict in the case is expected later this month, along with a ruling in another trial in which Berlusconi is a defendant on charges of having sex with an underage prostitute and abuse of office while he was still prime minister. Italy's new parliament must convene by March 15 at the latest under the rules of the constitution. After parliament meets, formal negotiations can begin with Italian President Giorgio Napolitano on a new government. Guglielmo Meardi, a professor at Warwick Business School in Britain, said Italy was "used to parliamentary instability... and should stay on the rails until the autumn, when fresh elections could be held."