By Barry Moody
ROME (Reuters) - The chaos and uncertainty following Italy's parliamentary election last month is compounded by the imminent retirement of the one man who has any chance of solving the crisis, President Giorgio Napolitano.
A wave of support for the populist 5-Star Movement produced an electoral earthquake in the Feb 24-25 poll, shaking the traditional political system to its foundations and creating an enormous headache for the head of state, who combines figurehead functions with the key power of appointing governments.
The outcome has created a perfect impasse, with none of the three biggest parliamentary groups capable of governing alone and fiercely at loggerheads with each other - not just over a ruling coalition, but over who should succeed Napolitano.
Despite cries of alarm from both business bosses and trade unions over an economy drifting deeper into trouble, the parties have been unable to agree on anything and are already into campaign mode for another vote which could come within months.
"There is no time left. We are very close to the end," said employers' leader Giorgio Squinzi, saying businesses were desperate, soaring unemployment was tragic and the euro zone's third largest economy needed a stable, effective government.
At stake are not just Italy's fortunes but, potentially, the wider euro project, as Rome grapples with massive public debts.
If there is a person in Italy capable of solving this puzzle it is Napolitano, a former communist in his late 80s with a long lifetime of political experience who enjoys enormous respect.
He is holding the line against a snap new election, which would probably resolve nothing and could make the situation worse if held under the same, deeply flawed electoral law blamed for much of the present chaos.
But Napolitano's seven-year term ends in mid-May and the divided new parliament must meet by mid-April to elect a successor, raising the prospect that a fragile government appointed by Napolitano will then have to rely almost immediately on a completely different and untried head of state to give the institutional support it will need to stay afloat.
"He might baptize this government but not take it to the altar," political science professor Filippo Andreatta of Bologna University said of Napolitano, who will turn 88 in June.
Because of the dangers of a relative novice trying to supervise a highly complicated political situation, Napolitano is under pressure to extend his term, something he has repeatedly rejected, citing his advancing years. As he put it at the weekend: "At the age of 88, overtime is not permitted."
LEAP IN THE DARK
Yet finding a new president - a process involving a combined vote by both newly elected and fragmented houses of parliament - at a time like this, when Italy desperately needs at least a few months of stability, looks like a leap in the dark:
"There are no readily available people with that authority on the market right now," Andreatta said. "There are people who might become authoritative in time - but time is not what we have."
The presidential ballot is not just an unwelcome extra element of uncertainty, it is an intrinsic part of the crisis itself, with centre-right leader Silvio Berlusconi making his agreement on the new head of state a condition for supporting a government and avoiding another national election.
But Berlusconi, centre-left leader Pier Luigi Bersani and 5-Star leader Beppe Grillo are as divided over who should be the next president as they are over forming a government.
"The presidential election may even exacerbate the crisis," said Professor Gianfranco Pasquino of Johns Hopkins University.
A new vote could in theory come as early as June and although that seems unlikely, nobody is betting on a new government lasting more than a year, even if it can be formed.
Bersani, whose bloc took the largest share of the vote in February but failed to secure enough support to govern alone, is currently trying to garner enough backing from other groups to win a vote of confidence in parliament as prime minister. His chances are slim and his own party leadership is on the line.
Bersani won the election by a whisker, claiming a victor's bonus of seats that gives him firm control of the lower house. But he is short of a majority in the powerful Senate.
His repeated overtures to Grillo have been rebuffed with insults, and Bersani rejects Berlusconi's demands that he instead form a left-right grand coalition with the scandal-tainted media magnate - something many on the left believe would hemorrhage even more of their votes to 5-Star.
Bersani will report back to Napolitano on Thursday, six days after the president asked him to try and form a coalition. He has been seeking passive support from individual members of other parties for a limited reform program so that they would refrain from voting against him in a confidence vote.
If Bersani fails, Napolitano is expected to try to appoint a technocrat-type government like the one he created under the now outgoing prime minister Mario Monti in November 2011, when he replaced Berlusconi as Italy faced a perilous debt crisis.
Ironically, given Napolitano's imminent retirement, such an administration is known as a "president's government" because it relies on the personal authority of the head of state.
The difference from the Monti administration is that Napolitano would not be around to give vital support to the premier, making the survival of such a government uncertain.
Adding to the problems, a technocrat government would itself have to win a confidence vote from a broad right-left alliance like the one that collapsed in December and brought Monti down when Berlusconi withdrew support. Napolitano himself has said setting up another such administration would be tricky.
So far, Bersani has adamantly refused to cut a new deal with Berlusconi, who he says is totally discredited, although this stance risks splitting the centre-left Democratic Party because a portion of its members are more open to such an alliance.
Whatever happens, the presidential election remains a key piece of the jigsaw, with Berlusconi threatening open conflict if Bersani tries to use his greater parliamentary numbers to install another leftist like Napolitano.
On the other hand, some kind of a deal over the presidency might ease negotiations on a government between Bersani and Berlusconi.
The media magnate is widely believed to want a friendly face in Rome's Quirinale Palace, the seat of the presidency, to protect him from his many legal problems, including a current trial on charges of having sex with an underage prostitute.
While Bersani is unlikely to accept Berlusconi's own preferred candidate - thought to be his long-term consigliere, Gianni Letta - he could put forward a figure with independent and moderate credentials to win centre-right support.
Names being mentioned in that context are veteran centre-left politician and former premier Giuliano Amato, current technocrat interior minister Anna Maria Cancellieri and former European commissioner Emma Bonino - raising the prospect of Italy getting its first woman head of state.
Despite the appearance of an inexorable march toward another parliamentary election, that would be in the interests of few in Italy, with the possible exception of the buoyant Grillo, and there are technical problems with holding a very early new vote.
Neither politicians nor the electorate want a campaign in the summer; most parties have an interest both in changing the electoral law to something less dysfunctional that may also undermine Grillo and in passing other popular reforms, including a cut in a hated housing tax, before going back to the voters.
"A return to the polls with the existing electoral system would resolve nothing," said Bersani's deputy Enrico Letta.
The collapse of negotiations to form a government and the calling of new elections could also finally disturb financial market investors, who have so far been relatively sanguine about Italy, despite the fact that it represents a much greater existential threat to the euro zone than the Cyprus crisis.
"I believe investors have not singled Italy out yet because even we Italians are puzzled about what exactly is going on," said Bologna University's Andreatta. "But as soon as it comes out that Italy has very slim chances of a strong government then I think there may be a problem."
(Editing by Alastair Macdonald)
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