Italy seeks way out of crisis after Prodi quits
By Phil Stewart and Silvia Aloisi
ROME (Reuters) - Italy's president will hold crisis talks with political leaders on Friday to see whether he can avoid calling snap elections after a no-confidence vote forced Prime Minister Romano Prodi's government to resign.
Prodi stepped down late on Thursday after losing, as expected, the vote in the Senate. It was a crushing defeat for the centre left, which could usher in a return to power for former centre-right prime minister Silvio Berlusconi.
"The worst is over ... the most disastrous government in the country's history has gone home," cheered Il Giornale newspaper, which is owned by Berlusconi's family.
Left-leaning La Repubblica mourned Prodi's "unjust demise" following a mutiny by Catholic centrist allies who brought down his coalition after just 20 months. Centrist Corriere called it a "pre-announced suicide."
Under the constitution, President Giorgio Napolitano must consult party and parliamentary leaders as well as former heads of state to find a way out of the political impasse.
The talks, set to begin on Friday, are expected to be long and difficult, as there is no consensus between the main political forces on what to do.
Berlusconi's centre-right opposition, which has a solid lead in opinion polls, wants early elections, and those could be held within the next two months. Some Italians favor the idea.
"Elections, right now!" said commuter Giovanni Giorgi as he headed to work in Rome.
But Napolitano is known to oppose holding snap polls under the messy current electoral system, which saddled Prodi with a tiny Senate majority and an unstable nine-party coalition ranging from Catholics to communists.
NEW VOTING RULES
Many Italians hope for electoral reform to cure chronic instability, illustrated by the fact that Prodi's 20-month spell in power was the seventh longest government in post-war Italy.
The president's only alternative to calling snap elections is to see whether there is enough support for an interim government, whose main task would be to change the voting rules before sending Italians back to the polls.
Such a government would probably be led by a prominent political figure or a technocrat, and would need broad-based, cross-party backing.
Some newspapers speculated that Senate president Franco Marini or even Prodi's interior minister, Giuliano Amato, could oversee those reforms as head of a temporary government.
While that prospect is favored by Prodi's Democratic Party and even by some in the opposition, many small parties on both sides of the political divide fear reforming the electoral law would reduce their weight in future coalitions.
"Everyone must decide if they want to give the Italian people more instability or contribute to a new electoral law which will help governability," said Walter Veltroni, the Rome mayor anointed as Prodi's successor to lead the centre left.
Analysts said the demise of Italy's 61st government since World War Two should not hurt growth prospects, as Prodi had been too busy surviving politically to carry out deep reforms, but it could threaten a recent improvement in public finances.
"This isn't necessarily bad news, it all depends what comes after Prodi," said Unicredit MIB economist Marco Valli. "Markets don't like uncertainty but if what follows Prodi is a stronger government, then that could be positive."
(Editing by Andrew Roche)