By James Mackenzie
ROME (Reuters) - Italian President Giorgio Napolitano called centre-left leader Pier Luigi Bersani to a meeting on Friday, suggesting he may ask the former industry minister to seek support from other parties to form a government and end political deadlock.
Napolitano completed two days of consultations with party leaders on Thursday after an election last month which gave the centre-left control of the lower house but left it short of a majority in the Senate, meaning it cannot govern alone.
With no party holding a majority in parliament, the euro zone's third largest economy faces the prospect of weeks of uncertainty just as the banking crisis in Cyprus revives fears of a renewed bout of financial market turmoil.
In a statement on Friday, the president's office said that Bersani, a 61-year-old former communist, had been summoned to meet Napolitano in the Quirinale Palace for a meeting at 5 p.m. local time (1600 GMT).
Bersani said late on Thursday that he hoped to be able to present a limited programme of economic and institutional reforms that could be backed by all forces in parliament.
However the Democratic Party (PD) leader, whose position has come under growing pressure over his failure to convert a 10-point opinion poll lead into a clear election win, faces trenchant resistance from the other parties.
"The reality is that whoever gets a mandate to form a new government has to be able to show they have a stable political majority already in place. And at this moment, Bersani can't be that person," said Renato Brunetta, the lower house leader of Silvio Berlusconi's centre-right People of Freedom party (PDL).
If Bersani cannot gather enough support, Italian media have speculated that Napolitano could ask a respected outside figure, such as Senate speaker and former top anti-mafia judge Pietro Grasso, to try to form a government. He has said he would be willing to serve the state in any way he can.
However the anti-establishment 5-Star Movement led by former comic Beppe Grillo has repeatedly said it will not back a government led by any other party.
RECESSION
Former Prime Minister Berlusconi, who has been encouraged by recent opinion polls showing his support is rising, says the inconclusive election result shows that Italy has not made a clear choice and that the centre-left does not have the right to govern alone.
He has called for a cross-party coalition with the PD that would give his group a share in government and the right to decide a successor for the 87-year-old Napolitano, whose term ends on May 15.
If no durable accord can be reached, Italy faces a return to the polls within months, delaying any prospect of substantial reform to its stagnant economy, now stuck in its longest recession in 20 years.
Underlining the tense political climate, the PDL is due to hold a rally on Saturday to protest against two trials Berlusconi faces over his appeal against a tax fraud conviction and separate charges of paying for sex with a minor.
Napolitano has given no hint of what he intends to do beyond telling the speakers of parliament that it was "absolutely necessary" to form a government, suggesting he will try to avoid early elections if at all possible.
Financial markets have been watching the political uncertainty closely although there has so far been no sign of the panic that gripped investors during the 2011 crisis which brought down the last Berlusconi government.
The main barometer of confidence, the spread between yields on Italian and German 10-year government bonds, has risen since the beginning of the year by some 20 basis points to 320 points, well short of the level of more than 550 seen in late 2011.
However Italy's 2-trillion-euro public debt is vulnerable to any bond market turbulence and public finances have deteriorated sharply during the recession, despite the tax hikes and spending cuts imposed by outgoing technocrat Prime Minister Mario Monti.
Monti's caretaker government cut its economic forecasts on Thursday and now sees gross domestic product contracting by 1.3 percent this year following the 2.4 percent decline in 2012. The budget deficit is expected to hit 2.9 percent of output, just within EU limits.
(Editing by Barry Moody)
