Italy parties deadlocked as parliament opens
ROME (Reuters) - Italy's divided parties failed to overcome their differences in a vote for parliamentary speakers on Saturday, deepening the stalemate after last month's deadlocked elections and raising the prospect of a return to the polls within months.
Italy has been caught in an impasse since the election in February that saw the centre-left alliance of Pier Luigi Bersani gain a lower house majority but miss the numbers needed to control the Senate as well and form a government.
With memories still fresh of the crisis that brought Prime Minister Mario Monti to power in 2011, the impasse has aroused fears that bond markets could take fright, reigniting the turmoil and endangering the government's ability to manage Italy's 2-trillion-euro public debt pile.
In the vote on Saturday, the lower house elected Laura Boldrini from the centre-left as speaker after populist comic Beppe Grillo's 5-Star Movement, which holds the balance of power in parliament, rejected Bersani's offer to back its candidate.
Although the result gave the centre-left the influential speaker's chair, it underlined Bersani's failure to secure a wider accord with the anti-establishment 5-Star Movement that may have allowed him to form a government.
Officials from former prime minister Silvio Berlusconi's centre-right bloc, with whom Bersani has ruled out any form of alliance, said the result of the vote showed that the centre-left would not be able to govern.
"It's difficult to imagine any solution that doesn't involve going to the polls," said former Industry Minister Paolo Romani, one of Berlusconi's closest allies in parliament.
The picture may become clearer later on Saturday when the elaborate multi-round voting procedure is complete and the Senate elects its speaker.
After several rounds, the vote has come down to a choice between former anti-mafia judge Piero Grasso from the centre-left and Renato Schifani, the former centre-right Senate speaker.
Mindful of the threat of instability, President Giorgio Napolitano issued a statement saying that Monti would remain in office until a new government is formed.
"It is important that in Europe, and in the exercise of whatever initiatives are possible and needed especially for the economy and jobs, the government remains under the authoritative leadership of Mario Monti until a new government is formed," Napolitano said in a statement.
BLOCKED NEGOTIATIONS
Even by the byzantine standards of Italian politics, the current situation is unusually complicated. But if the parties cannot find a way out of the stalemate, Italy faces the prospect of a return to the ballot box within a few months.
Napolitano said he would begin sounding out party leaders on Wednesday to see if any of them can muster enough support to form a workable majority in parliament.
The standoff is being watched across Europe with growing alarm at the prospect of prolonged instability and a halt to the reforms started by Monti to try to revive Italy's chronically stagnant economy.
In an interview with a German magazine on Saturday, the influential head of the Bundesbank, Jens Weidmann said that Italy could not count on support from the European Central Bank if it turned its back on reforms.
Italy's borrowing costs have come down sharply since the height of the 2011 crisis following ECB President Mario Draghi's pledge to support countries in difficulty by buying their bonds but there have been growing warnings that the calm may not last.
Italy's economy is deep in recession, unemployment has reached record levels especially among the young and faith in political institutions has virtually collapsed, with a recent poll showing only 14 percent of Italians expressing confidence in parliament.
Underlining the potential for instability, an opinion poll on Friday by the SWG institute showed rising support for Grillo, who wants a referendum on the euro and who said in an interview this week that Italy was "already out of the euro."
It showed Grillo's support at 30 percent, compared with the 25.5 percent his movement won in the election, ahead of both Bersani's centre-left Democratic Party (PD) on 25.1 percent and Berlusconi's People of Freedom (PDL) party on 23.3 percent.
Berlusconi's own position has been made more difficult by trials on charges of tax fraud and paying for sex with a minor. He also faces an investigation into allegations he bribed a former Senator to change sides in 2006 to help bring down the last centre-left government.
The trials have sparked furious accusations by the PDL, which says politically motivated prosecutors are trying to destroy him. PDL members staged a demonstration on the steps of the Milan courthouse this week.
On Saturday, judges ruled that a hearing in the tax fraud trial related to Berlusconi's Mediaset broadcasting empire could be delayed until March 23 due to the eye problems that kept the 76-year-old media magnate in hospital all week.
(Reporting by James Mackenzie; Editing by Mark Heinrich, John Stonestreet)