* Bersani runs into brick wall with other parties
* President says will make decision without delay
* Financial markets nervous over stalemate
* New talks on Friday
By James Mackenzie and Barry Moody
ROME, March 28 Centre-left leader Pier Luigi
Bersani has failed in his attempt to find a way out of Italy's
political deadlock and President Giorgio Napolitano will now
seek another solution, the president's palace said on Thursday.
Bersani reported back to Napolitano on Thursday night after
being given a mandate almost a week ago to see if he could
muster enough support to form a government after the
inconclusive election in February.
Napolitano's office said Bersani, who took the largest share
of the vote but failed to win a viable majority, had told him
his talks with other parties had ended without resolution and
the president would now assess other options "without delay".
Bersani said he had told Napolitano of "significant,
positive elements of understanding" in the talks with groups
including Silvio Berlusconi's centre-right bloc and the populist
5-Star Movement led by ex-comic Beppe Grillo.
"I also explained the difficulties deriving from objections
or conditions which I did not consider acceptable."
The failure to reach a conclusion leaves Italy still stuck
in political limbo more than a month after the election with the
bank crisis in Cyprus fuelling fears of financial market turmoil
that could threaten the stability of the euro zone.
Officials said Napolitano would start a new round of
consultations with parties on Friday, beginning with
Berlusconi's People of Freedom (PDL) party in the morning and
ending with Bersani's Democratic Party (PD) in the evening.
A PD spokesman said Bersani had not given up on forming a
government but the PDL poured scorn on the centre-left leader
and said he had wasted a month in a fruitless bid that proved he
did not have the numbers to govern.
Napolitano has said he opposes a snap new election to end
the impasse but his options are severely limited if he is to
avoid a return to the polls within months.
They include naming an outsider to head a technocrat
government like that of outgoing Prime Minister Mario Monti or a
cross-party political coalition but any government must be able
to rely on a majority in parliament.
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.
Bersani had expressed hopes up to the last minute that he
could overcome the difficulties but appeared to have run into a
wall, particularly in his overtures to Grillo, whose movement
says it will not support a vote of confidence in a government
led by either the centre right or centre left.
Bersani has in turn rebuffed demands by Berlusconi that he
form a broad left-right coalition, saying the scandal-plagued
media magnate was too discredited to deal with.
Mindful of the risk of instability, Napolitano had insisted
Bersani obtain firm guarantees of support from the other parties
for a vote of confidence in parliament before he would agree to
give him a firm mandate to form a government.
Bersani had tried to win support for a list of reforms that
included measures on issues like political conflict of interests
and corruption that were opposed by Berlusconi and he was never
able to win enough guaranteed backing.
The scale of the task now facing Napolitano was underlined
by Bersani earlier this week when he said that only someone who
was "insane" would want to lead a government given the problems
The centre-left leader's struggle to reach an agreement
showed how hard it will be even for any new technocrat cabinet
to win support in the divided parliament, increasing the chances
of a snap election.
An election can only be called after parliament elects a
successor to Napolitano, whose term ends in mid-May.
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.