Italy

President Giorgio Napolitano, a former communist resistance fighter who negotiated Silvio Berlusconi’s resignation, is preparing his final political battle as he seeks to steer Italy out of its latest government crisis before his term expires in May. Napolitano, 87, is charged with resolving the political logjam caused by elections last month that produced a hung parliament. To avoid a new vote, he can try to forge a national- unity government, accept an administration without a majority or appoint a non-politician to head a so-called technical government, similar to that of Prime Minister Mario Monti. Markets are pricing in two scenarios, “another technical government or the possibility, which is less and less likely, of a bipartisan government,” Mario Spreafico, who manages 1.5 billion euros ($1.95 billion) as chief investment officer at Schroders Private Banking for Italy, said in a phone interview. “Both would be temporary solutions” before new elections.” The Feb. 24-25 ballot, which left front-runner Democratic Party leader Pier Luigi Bersani short of a majority in the Senate, has forced him to court the support of former comedian Beppe Grillo and his anti-establishment Five Star Movement, which won a quarter of the vote. Grillo responded by describing Bersani as a “dead man walking,” stressing his party would not give backing to any government. Italy’s 10-year bond yield has risen 21 basis points since the vote to 4.66 percent.

Pier Luigi Bersani, the notional winner of Italy’s general elections last month, told his party’s senior leaders that he would try to form a government even though his center-left coalition didn’t have a Senate majority. Any alliance with Silvio Berlusconi, longtime leader of the center-right, was “not practicable,” while some form of dialogue with the anti-establishment Five-Star Movement might be, Mr. Bersani said as he opened a day-long meeting of his Democratic Party’s top officials Wednesday. Mr. Bersani, whose center-left coalition narrowly won the most votes in an election that unexpectedly showed a near tie between three rival groups, is under pressure to outline how he will try to form a coalition able to pass a confidence vote in both parliamentary chambers. Political instability in Italy has raised concerns that the euro area’s policy approach to its sovereign debt crisis is failing. Italy’s election was a “thermometer” of long-simmering tensions, Mr. Bersani said, noting that euro-skepticism is growing even in Germany.

As Italy faces a deep political crisis, the fate of the country is in the hands of an octogenarian former communist only weeks from retirement. Under Italy’s constitution, President Giorgio Napolitano, 87, is charged with trying to find the way out of an intractable impasse caused by a huge protest vote in the Feb 24-25 election, which saw no group emerge with enough support to govern. The task is exceedingly difficult, but if anybody can succeed it is probably Napolitano, who enjoys both huge respect and popularity, and has shown skill in navigating previous major storms in Italy. In fact after an election in which Italians vented their rage against the politicians, he may be the only traditional political figure left who commands much respect at all. Napolitano has stepped into the breach in a moment of emergency before, in November 2011, when Italy faced a perilous debt crisis. He engineered the replacement of scandal-plagued premier Silvio Berlusconi with technocrat Mario Monti.

Italy could be inching closer towards another election within months after center-left leader Pier Luigi Bersani issued an ultimatum to anti-establishment comic Beppe Grillo to support a new government or return to the polls. Last week’s election, in which Grillo’s 5-Star Movement won a huge protest vote, left no group with a working majority in parliament, making an alliance with a rival the only way out. On RAI state television late on Sunday, Bersani underlined his opposition to two of the options floated – another technocrat government like the outgoing one led by Mario Monti or a coalition with Silvio Berlusconi’s center-right. That would leave only one possibility to avoid elections – Grillo’s backing for the center-left, which won the lower house in the election but does not have enough support in the Senate. “Now (Grillo) must say what he wants, otherwise we all go home, including him,” Bersani said.

Italy may hold new elections within months should Democratic Party leader Pier Luigi Bersani fail to win support in parliament to form a government after inconclusive elections. There are no alternatives to a vote “in a few months” if Bersani doesn’t get a majority in parliament, Stefano Fassina, economic-policy spokesman for Bersani, said today on Sky TG24 TV. “We should name a new president, change the electoral law and then return to polls as soon as possible.” Italian bond yields surged after elections on Feb. 24-25 ended in a four-way parliamentary split, raising doubt over the stability of the next government. Bersani, whose party won the most votes, failed to gain control of parliament as former Prime Minister Silvio Berlusconi and comedian-turned-politician Beppe Grillo won blocking minorities in the Senate.