Italy president could resign to break deadlock

Italian President Giorgio Napolitano is considering resigning immediately to make way for new parliamentary elections after attempts to form a government failed this week, a person close to the situation said on Saturday."The idea is on the table along with many others," said the person, who declined to be named because of the sensitivity of the issue, adding that the president would probably make a statement later in the day, Reuters reported.All of Italy's main newspapers reported that Napolitano, whose term ends on May 15, was considering stepping down to get around constitutional provisions which prevent a president dissolving parliament in the final months of his mandate.The 87-year-old head of state met leaders of the main parties on Friday to try to find a way out of the stalemate left by an inconclusive election in February, which raised fears of prolonged uncertainty in the euro zone's third-largest economy.However with all of the three main groups in parliament clinging to entrenched positions that have prevented a government-forming majority being formed, hopes of a solution that would avoid early elections have faded.The apparently coordinated leak of Napolitano's thinking to the main daily newspapers may have been a move by the president to increase pressure on the intransigent parties to secure a deal, but their differences remain very wide.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 round of talks this week.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 supporting a new technocrat government like the one led by outgoing Prime Minister Mario Monti, blocking what appears to be the only other option.If Napolitano did resign, a new president would have to be elected by a joint sitting of parliament along with representatives from the regions, with a fierce and probably extended battle likely between the three rival blocs on that as well.If a successor were to dissolve parliament, new elections would be held between 45 and 70 days later, leaving weeks of uncertainty just as the Cyprus banking crisis has renewed fears of instability in the euro zone.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 a prolonged economic crisis that has fuelled growing disillusion with the political class.The country 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.Rumors have been circulating for days that ratings agency Moody's is preparing to cut its rating on Italy's sovereign debt, which is already only two notches above "junk" grade, partly due to the uncertain political outlook.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.Opinion polls issued in the past few days have suggested that Berlusconi could continue the strong surge that enabled him to close a substantial gap with the center-left in the final days of the election campaign in February.A poll by the SWG company on Friday showed his center-right alliance with the Northern League in first place with 32.5 percent of the vote, ahead of the center-left on 29.6 percent and Grillo's 5-Star Movement on 24.8 percent.The polls could encourage Berlusconi to gamble on a quick new election, although unless a deeply flawed electoral law is repealed before the vote, it could produce another damaging stalemate.