* Bersani to report to president Thursday evening
* Financial markets nervous over stalemate
* Bank of Italy, ISTAT say recession may exceed forecast
By James Mackenzie
ROME, March 28 Italy's centre-left made a
last-ditch appeal to other parties on Thursday to clear the way
for a new government before its leader, Pier Luigi Bersani,
reports back to President Giorgio Napolitano later in the day.
Bersani, whose alliance fell short of the majority it would
need to govern after last month's election, has made little
headway in five days of talks with rival parties.
The stalemate in the euro zone's third-largest economy has
been watched with growing alarm across Europe as the crisis in
Cyprus increased concern about the renewal of market turmoil
that would threaten the stability of the currency bloc.
On Thursday, the main indicator of market confidence, the
spread between Italian 10-year bonds and their safer German
counterparts widened to 350 basis points, some 30 points higher
than the level seen before the Feb. 24-25 election.
Both former Prime Minister Silvio Berlusconi's centre-right
bloc, the second largest force in parliament, and the
anti-establishment 5-Star Movement, which holds the balance of
power, have rebuffed Bersani's attempts to form a viable
However with only hours to go before Bersani must report to
Napolitano on his exploratory efforts, officials from his
Democratic Party refused to concede defeat.
"It often happens that the most delicate issues are resolved
in the final phase," said Luigi Zanda, head of the PD's Senate
group, urging other parties to help find a "positive solution".
Mindful of the risk of instability, Napolitano has insisted
Bersani obtain firm guarantees of support from the other parties
before he will give him a full mandate to form a government.
With prospects of a deal receding, options include naming an
outsider to head a technocrat government like that of outgoing
Prime Minister Mario Monti or a broad cross-party coalition.
Prospects that Monti may be asked to remain in office have
faded since Foreign Minister Giulio Terzi quit this week in a
shock move that showed the tensions in the caretaker government.
But Bersani's struggles have shown how hard it will be even
for a new technocrat cabinet to win parliamentary support,
increasing the chances of a snap new election.
For that to happen, however, a new head of state must be
elected by parliament to succeed Napolitano, whose term ends in
mid-May. Italian constitutional rules prevent a president from
dissolving parliament during the final months of his mandate.
Even this task is politically fraught because Berlusconi
wants to pick the new head of state, something Bersani rejects.
Underlining the challenges for the next government, a senior
Bank of Italy official and the head of Italy's statistics agency
ISTAT both said the government's latest economic forecasts may
still be too optimistic, even after being sharply cut last week.
Last week the government said the economy, in its longest
recession for 20 years, would contract 1.3 percent this year,
compared with a previous forecast of a 0.2 percent shrinkage.
However, ISTAT head Enrico Giovannini told a parliamentary
committee hearing on Thursday the result may be worse than that
with no recovery until the end of the year or early 2014.
The lack of a government has increased concern that the
slump will only get deeper.
"We need effective and credible economic policies to
interrupt the recessionary spiral," Daniele Franco, a top
central bank economist, told the committee.