Insight - Italy came to brink before being saved by "King George"

ROME (Reuters) - On Saturday April 20, the leaders of Italy's two biggest political forces climbed the Quirinal, highest of Rome's seven ancient hills, and begged President Giorgio Napolitano to stay for a second term.

Pier Luigi Bersani and Silvio Berlusconi were followed into the presidential palace by outgoing Prime Minister Mario Monti, Northern League boss Roberto Maroni and finally the governors of Italy's regions, in scenes that resembled schoolboys visiting the headmaster's office.

The fact that Italy's leading politicians had to implore an extremely reluctant 87-year-old grandfather to be the first president in Italian history to serve a second term is a measure of the depth of the most turbulent and intractable crisis seen for decades, even in a country synonymous with instability.

Since an election in February that left no group with enough support to govern alone, one political disaster had followed another like a motorway pile-up, culminating in the failure of 1007 "grand electors" from parliament and the regions to elect a new president after four attempts.

The political drama had implications far beyond Italy. The euro zone's third biggest economy had once before narrowly avoided being sucked into the region's financial crisis. Political gridlock brought renewed danger.

The group's pleas flew in the face of Napolitano's repeated and fierce rejection of the idea, going back months. With his 88th birthday two months away, the former communist was looking forward to retirement, playing with his two grandchildren and taking a holiday on the island of Capri with his wife Clio.

Napolitano was so sure of leaving that removal men had already taken away most of his personal effects. Sources with knowledge of the events inside the former papal palace on the Quirinal hill said his office was so bare that there were not even notebooks available when he received the delegations.

He had told his aides the night before that he expected to hand over the presidency within days, the sources said.

The presidential election was key to ending the two-month deadlock and installing Italy's 64th post-war government with some hope of passing reforms vital to counter a deep recession, but the politicians were incapable of finding a way out of the impasse.

Napolitano eventually agreed to stand again, was overwhelmingly elected and has installed a right-left grand coalition under centre-left politician Enrico Letta, bringing the crisis to an end, for now.

While fragile, the government is given a reasonable chance of lasting for a while at least, thanks mostly to the president's powerful protection, and his threat to resign immediately if the politicians go back to playing games.

BRINK OF DISASTER

But before he conceded out of what close associates say was an overwhelming sense of duty and patriotism, Italy had come to the brink of disaster.

"Napolitano has been decisive. No other president would have had enough authority to impose a government. If it had not been for him we would now be in a major constitutional crisis," said political science Professor Gianfranco Pasquino from Bologna's Johns Hopkins University.

Napolitano's phone started ringing on the night of Friday April 19, shortly after a major rebellion in Bersani's centre-left Democratic Party which sank his second candidate for president, former premier Romano Prodi, despite a unanimous party vote in a Rome theatre only that morning to support him.

Bersani had the most electors after beating Berlusconi's centre-right by a whisker in the February election but he had lost control of the party, which was close to collapse.

Bersani resigned that night, after railing against around 100 "traitors" who voted against Prodi, and was the first to make the pilgrimage to Napolitano.

Sources with knowledge of the meeting say Napolitano's determination not to remain was weakened by the sorry sight of the broken Bersani. He was finally convinced by the pleas of the regional governors.

He was also very worried that public anger against the politicians, fuelled by the diatribes of populist 5-Star Movement leader Beppe Grillo, could become violent.

Napolitano had what one source described as an "animated" lunch with his wife and 43-year-old son Giulio, and finally at 3 p.m. agreed to stay on. But the drama was far from over.

Napolitano went to parliament for his inauguration on the Monday morning, eschewing the normal pomp reserved for the occasion. He angrily excoriated the chastened politicians, accusing them among other charges of irresponsibility, exploitation and sterile political battles.

He said their failure despite his repeated urgings last year to repeal a flawed electoral law that was largely responsible for the poll result was "unforgivable."

Then, unveiling his biggest weapon, he told them he would not hesitate to resign, "if I find myself again confronted by the kind of deafness with which I have collided in the past."

SURREAL SCENE

The reaction of the parliamentarians was little short of surreal. With the exception of Bersani, who held his head in his hands, the rest of the audience responded to their punishment with enthusiastic applause.

The astonishing scene was caricatured in La Stampa newspaper by columnist Massimo Gramellini who said the politicians were like motorists carrying a traffic policeman in triumph on their shoulders after he had given them a sheaf of parking fines.

One political official said Napolitano's threat to resign was not an empty one. "His determination is very strong ...if the politicians try to mock him with their games," he said.

It was not long before Napolitano had to use this weapon.

Two days after his own inauguration, he nominated Letta as prime minister, but coalition horse trading with Berlusconi ran into trouble in a dispute over the position of economy minister.

Berlusconi wanted the job to go to his close ally, Renato Brunetta, a centre-right hardliner, but that was opposed by Letta's centre-left. Political sources said Napolitano picked up the phone and called Berlusconi. One source says he threatened to resign if the dispute prevented a government being formed.

Berlusconi conceded, allowing the job to go to Bank of Italy director general Fabrizio Saccomanni.

High on Letta's priorities are constitutional changes to fix the skewed electoral law, which grants a giant winner's premium in the lower house of parliament even if the margin is tiny. It will be a long process and before it happens Napolitano has powerful leverage with his threat to resign or call a new poll.

So as in November 2011, when Napolitano rescued Italy from a perilous debt crisis by replacing the discredited Berlusconi with technocrat Mario Monti, Italy's fate once again depends on the man affectionately known as "King George."

But with the future deeply uncertain as far as the eye can see, Italians are wondering whether he will really be forced to stay for a full seven year term, by which time he will be 94, in order to keep the euro zone's third-largest economy on track.

(Writing by Barry Moody; additional reporting by Paolo Biondi; editing by Janet McBride)

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