Italy president hosts talks as deadlock drags on

Italian President Giorgio Napolitano on Tuesday hosted experts from two working groups aimed at finding common ground for bickering political leaders who have failed to form a new government as Prime Minister Mario Monti's cabinet limps on.

Elections in the eurozone's third largest economy more than a month ago resulted in a three-way split between Pier Luigi Bersani's centre-left, Silvio Berlusconi's centre-right and a new protest party led by former comedian Beppe Grillo.

Talks have proved inconclusive and Napolitano on Saturday said he was setting up two working groups -- one for political reforms, the other for economic ones -- as a way of trying to forge an agreement at least on a few fundamental reforms.

The groups include constitutional expert Valerio Onida and will look into cutting bureaucratic costs and reducing the number of lawmakers in the Italian parliament -- 945 including deputies in the lower house and senators in the upper house.

Emergency economic measures are also on the agenda as the country endures its sixth consecutive quarter of recession and the unemployment rate remains close to record highs at 11.6 percent.

Some experts say Napolitano's initiative could be aimed at forging a cross-party government deal similar to the one struck in the Netherlands in October 2012 two months after inconclusive polls.

But Berlusconi's People of Freedom party has already criticised the move as a delaying tactic, insisting there should be new elections if no solution can be found to the deadlock.

A recent poll indicated that the 76-year-old Berlusconi -- a scandal-tainted billionaire tycoon who has called for the abolition of an unpopular property tax imposed by Monti and criticised Germany's role in Europe -- would win elections.

"The house is burning. No one would understand more delays," said Angelino Alfano, secretary general of Berlusconi's People of Freedom party.

The SWG poll published last week gave Berlusconi 32.5 percent compared to 29.6 percent for Bersani.

"Napolitano wanted to send a reassuring signal... and show that 10 intelligent and well-intentioned people can agree on some useful objectives for the future of the country," said Sergio Romano, a columnist for the Corriere della Sera daily.

The 87-year-old Napolitano's tactic appeared to be working, with borrowing costs down and the Milan stock market trading in positive territory after falling slightly at the start of the session.

Napolitano considered resigning over the crisis but was persuaded not to by European Central Bank chief Mario Draghi, Italian media reported.

A resignation "would have exposed the country to a very grave risk in terms of its international credibility," Ugo De Siervo, former head of Italy's top court, said in La Repubblica daily.

De Siervo said Napolitano's plan was to "encourage the parties to show greater responsibility" and prepare for the end of his mandate on May 15, by which time parliament has to elect a new president.

Napolitano cannot call new elections because he is in the last months of his seven-year mandate but his successor would be able to do so.

Monti's government will stay in place with interim powers until a new government is formed.