Italy president hosts talks as deadlock drags on

Italian President Giorgio Napolitano on Tuesday said two working groups of experts he set up to try and find common ground for bickering political leaders who have failed to form a new government would take eight to 10 days to complete their task.

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.

Prime Minister Mario Monti, who steered Italy out of the debt crisis but came a distant fourth in the election because of criticism of his austerity measures, will remain in office with limited interim powers until a new cabinet is formed.

Bersani has failed to woo lawmakers from Grillo's Five Star Movement and has ruled out a grand coalition with his arch-rival Berlusconi, a scandal-tainted billionaire who has been prime minister three times in two decades in politics.

Berlusconi has said there should either be a cross-party agreement or Italy should hold new elections -- a prospect that worries European capitals and financial markets concerned that instability could reignite the eurozone crisis.

A recent poll indicated that Berlusconi, who has been fiercely critical of Germany's role in Europe and questioned whether Italy should stay in the euro, would win snap elections with 32.5 percent of the vote against 29.6 percent for Bersani.

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

Bersani's coalition won the February 24-25 elections by a whisker -- just 125,000 votes ahead of Berlusconi, who has won popularity with his call for an end to austerity and the abolition of an unpopular property tax imposed by Monti.

The two working groups set up by Napolitano have a total of 10 experts, including political and non-political figures, with one group devoted to political reforms and the other to economic ones.

The first will look into trimming bureaucratic costs and reducing the number of lawmakers in parliament -- 945, including deputies in the lower house and senators in the upper house.

The second will look at emergency economic measures as the country endures its sixth consecutive quarter of recession and unemployment remains near 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.

"The right time for the two working groups is eight to 10 days," Napolitano said in a statement, defending himself against criticism of the make-up of the two all-male groups by saying that they were set up "with necessary extreme rapidity".

"I found it impossible to continue the search for a solution to the government crisis because of the rigidity of the positions of the main political forces," he said, adding that the experts would not "indicate one government type or another".

Sergio Romano, a columnist for the Corriere della Sera daily, said the working groups were meant to send "a reassuring signal" to the rest of Europe.

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

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

Napolitano cannot legally call new elections because he is in the last months of his seven-year mandate, which runs out on May 15, but his successor would have full powers to do so.