Italy coalition close

Prime Minister-designate Enrico Letta, deputy leader of the centre-left Democratic Party (PD), met President Giorgio Napolitano on Saturday afternoon in Rome to report on his attempts to form a coalition government.

There have been two months of political deadlock since February's inconclusive national election. Letta was charged with forming a government by Napolitano last Wednesday.

Letta is a 46-year-old moderate on the right of the PD and the nephew of Gianni Letta, one of former premier Silvio Berlusconi's closest aides. Letta's uncle has attended most of the meetings aimed at forming a coalition.

Berlusconi's People of Freedom party (PDL) would be the PD's main coalition partner in government if a deal is reached. There is strong resistance in parts of the PD to an accord with Berlusconi, its sworn enemy for almost 20 years.

Former PD leader Pier Luigi Bersani resigned this month after a party rebellion. He told Letta on Saturday that he should not accept a deal with Berlusconi's PDL.

The February elections left Letta's PD party badly fractured by infighting after it won control of the Chamber of Deputies but failed to do the same in the Senate.

A coalition deal between the PD and PDL has been held up by wrangling over ministerial posts and policy differences. Berlusconi wants a housing tax to be scrapped; a move that would create an 8 billion euro hole in this year's budget plans.

Berlusconi said on Saturday he thought Italy would finally get a government; a broad coalition bringing his conservatives back in power. The media mogul also told journalists in Rome he would not be part of Letta's Cabinet. Berlusconi is in the middle of legal battles over a tax fraud conviction and charges of paying for sex with a minor.

The other main force in parliament, Beppe Grillo's anti-establishment 5-Star Movement, has ruled out taking part in a government made up of the two main parties. He called the right-left coalition "an orgy worthy of the best of bunga bunga", a reference to Berlusconi's much publicized parties at his private villas.

If the sides reach an agreement on Saturday, Letta could go before parliament for a confidence vote as early as Monday.

On Friday, ratings agency Moody's kept its rating on Italian government debt unchanged at Baa2 because low interest rates were making it possible to buy time to implement much-needed reforms.

Letta has said his government priorities will be boosting the economy and tackling unemployment, restoring confidence in Italy's discredited political institutions and trying to turn Europe away from austerity to focus more on growth and investment.

jm/ccp (Reuters, AP)