* Bersani says ready to form minority government
* Will propose limited series of measures to parliament
* Says austerity alone leads to disaster
* Says debt targets must be delayed
By Stephen Jewkes
MILAN, March 1 (Reuters) - Italian centre-left leader Pier Luigi Bersani on Friday ruled out forming a coalition with Silvio Berlusconi to solve an intractable crisis after this week's inconclusive election.
In an interview with the daily La Repubblica, Bersani, whose group holds a majority in the lower house but not in the Senate, said centre-right leader Berlusconi had "no concept of responsibility beyond his own interests".
"I want to spell it out clearly: the idea of a grand coalition does not exist and will never exist," he said.
His remark shuts off one of the two apparent options for a new government by closing the door on a formal alliance between the two biggest blocs in parliament, which both supported the technocrat government of outgoing Prime Minister Mario Monti.
Beppe Grillo's anti-establishment 5-Star Movement, which rode a huge protest vote to become Italy's third force, has ruled out giving a vote of confidence to another party but says it may back individual pieces of legislation.
Without majority support in both houses of parliament, a government cannot pass legislation or win a vote of confidence and there are deep concerns that a sustained stalemate in the euro zone's third largest economy could reignite Europe's debt crisis.
Bersani told La Repubblica he would present a programme based around a limited number of points, many of which are in line with Grillo's platform, and seek the support of parliament.
"You can call it what you want, a minority government, a government of limited purpose, I don't care. For me, it's a government of change," he said.
He said he would seek to ease the austerity programmes imposed by Monti with the approval of the European Union, saying he had consulted French Socialist President Francois Hollande. He added: "Austerity on its own leads to disaster".
"Everyone has to get it into their head that bringing down the debt and the deficit is an issue which has to be shifted to the medium term," he said. "At the moment, there is another priority, which is jobs."
Italy, with the second heaviest public debt burden in Europe behind Greece, has pledged to balance its budget in structural, or growth-adjusted terms, this year but the austerity measures imposed by Monti to reach the goal have pushed it deeper into recession.
Data released on Friday showed unemployment at its highest in at least 20 years at 11.7 percent, with the youth rate at nearly 39 percent.
Bersani has refused to resign despite the centre left throwing away a 10-point opinion poll lead with a weak campaign that let both Berlusconi and Grillo exploit public anger over the economy to make huge strides in the weeks before the vote.
But he is under pressure and there is speculation he could be replaced, possibly by Matteo Renzi, the dynamic young mayor of Florence whom he defeated in last year's primary to select the leader of the centre-left coalition.
Bersani said he would also present measures to strengthen the welfare system, cut the size of Italy's bloated parliament and reduce the generous salaries and benefits of deputies, some of the best paid in Europe.
In addition, he would propose a series of measures to fight corruption and limit conflicts of interest for politicians.
"I will present this programme to all the political forces to see who is ready to assume their responsibilities," he said.
How far Bersani will get with the proposals remains unclear, given the deep hostility and suspicion between the parties.
Grillo, whose Internet-based movement has shaken up Italian politics, has dismissed the 61-year-old former industry minister as a "dead man talking" and said the next government will not last more than a year.
On Thursday Grillo, a shaggy-haired stand-up comic, said if the centre left and centre right wanted a stable government, they should give their support to one led by his group, which won the biggest vote of any single party.
President Giorgio Napolitano has dismissed fears that Italy could be a destabilizing element in Europe and said formation of the new government could not be speeded up for constitutional reasons, which will delay his first attempts to appoint a prime minister until after March 15.
After an initial sell-off, financial markets have so far taken the instability largely in their stride, but the deadlock has raised fears the euro zone debt crisis, which brought Monti to power in 2011, could flare up again.