* Panel proposes cuts to political system, measures to boost growth
* Outgoing president says ending crisis is up to successor
* Berlusconi proposes deal with centre-left, sticks to coalition demand
By James Mackenzie
ROME, April 12 (Reuters) - A panel of “wise men” named by Italy’s president proposed a package of political and economic reforms on Friday, but there was little sign they would bridge the gap between feuding parties caught in deadlock since elections in February.
Italy has been left with a caretaker government for 45 days since the inconclusive elections gave no party enough seats in parliament to govern alone, while rivalries among faction leaders have made it all but impossible to agree a coalition.
In an effort to overcome the divide, President Giorgio Napolitano, whose term ends in May, named a 10-man group last month to come up with policy proposals that could serve as the basis for a broad common platform.
The panel, which includes a former head of the Constitutional Court, a member of the Bank of Italy’s board and senior politicians, proposed a range of changes to Italy’s system of government. They said red tape should be slashed, the bloated political system cut back, administration simplified and tax collection made more efficient.
Italy should also do more to help families hurt by the current recession and get more credit to small and medium-sized businesses, while sticking to fiscal austerity targets promised to European partners, the panel said.
It called for a new electoral law to replace the widely criticised current system which helped to produce the current stalemate, though it did not come up with a final recommendation for a replacement.
“The decisions are now up to the political forces, and it will be up to my successor to draw the conclusions,” Napolitano said after meeting the group.
The proposals, which have no legal force, differed little from a host of recommendations made by private economists, think tanks, industry associations and institutions including the Bank of Italy, as even some of the “wise men” acknowledged.
Maurizio Mauro, a centrist politician on the panel, said he agreed with one assessment that the recommendations amounted to “reinventing the wheel” but defended the exercise nonetheless.
“This work has highlighted a number of points which show that the things we agree on are stronger than the things which divide us,” he told SkyTG24 television. “Having said that, the parties now have to get together for the good of the country.”
The stalemate has not caused the kind of market panic feared before the election, but business leaders have been more and more vocal about the need for a government capable of tackling a recession that already equals the longest in postwar history.
Earlier this week the government was forced to raise its estimate for public debt to over 130 percent of gross domestic product this year, underlining the threat to the sustainability of Italy’s finances as the economy slumps further.
“The risk Italy faces is that we relax,” said Andrea Montanino, the International Monetary Fund official responsible for Italy. “The problem isn’t just reforms, it’s implementing the reforms,” he said at the margins of a conference in Turin.
Among the panel’s proposals were cutting the number of members of parliament, reforms to the Senate and changes to party financing, although they stopped short of recommending that state funding be scrapped altogether.
Italy’s political parties all say they are committed to deep reforms that would improve the way the country is run.
However, they have proved incapable of resolving the stalemate created by the election, which left parliament split between three hostile blocs, none of which can govern alone, making an early return to the polls a growing possibility.
On Friday, former prime minister Silvio Berlusconi said he would be prepared to accept a centre-left candidate as president of the Republic but only in exchange for a “grand coalition” that would give his centre-right bloc a share in power.
That option has already been ruled out repeatedly by centre-left leader Pier Luigi Bersani, who won control of the lower house but fell short of a majority in the Senate, where he would need the support of rival parties to win a confidence vote.
Bersani has failed to win the backing of the other main force in parliament, the anti-establishment 5-Star Movement led by ex-comic Beppe Grillo, which refuses any deal with the mainstream parties.
Bersani now hopes to form a minority government tolerated by enough members of the rival parties to pass a limited set of reforms, but he is under pressure within his own Democratic Party to abandon his attempt and have fresh elections.
An opinion poll for the SWG institute on Friday suggested Berlusconi’s centre-right alliance would win an election held now with 33.4 percent of the vote against 30.7 percent for the centre-left.
Voting for the next president, due to begin on Thursday, is the next hurdle facing parliament and will be vital to ending the stalemate. Napolitano’s mandate is almost complete, and he no longer has the power to dissolve parliament.
Numerous names have been floated as his successor including former prime ministers Romano Prodi and Giuliano Amato plus former European Commissioner Emma Bonino, but no clear favourite has emerged.