By James Mackenzie and Barry Moody
ROME (Reuters) - President Giorgio Napolitano asked center-left leader Pier Luigi Bersani on Friday to assess whether he can win enough support in Italy's divided parliament to form a government and end the political deadlock left by elections last month.
After two days of consultations with political leaders, Napolitano said he had given Bersani a mandate to talk to other parties and see if he can get the guaranteed support needed for a vote of confidence in both houses of parliament, where no single group has a workable majority.
The stalemate has left Italy, the euro zone's third-largest economy, facing the prospect of weeks of uncertainty as the bank crisis in Cyprus has reawakened fears of a renewed bout of financial market turmoil in the currency bloc.
Bersani, whose center-left alliance won control of the lower house but not of the Senate, must report back to Napolitano as soon as possible on whether he can get enough support from rival political forces to form a governing majority.
The 61-year-old former communist said he would seek to form a reform-minded government "with the maximum balance and determination".
He has said he hopes to present a limited program of economic and institutional reforms that could be backed by all forces in parliament but he faces formidable obstacles after a bitter election campaign.
Bersani until now has sought support from the anti-establishment 5-Star Movement and refused overtures from Berlusconi, who wants to share power in a grand coalition between center-right and center-left.
However he has been repeatedly and rudely rebuffed by the 5-Star leader, ex-comic Beppe Grillo, who says his group will not back any government formed by one of the mainstream parties.
In a television interview on Friday evening, Berlusconi said Bersani's only chance of forming a government was to go into coalition with his center-right group.
"It would put Italy in grave danger if Bersani were to insist on the wrong route, we would not have a government but a leap into the dark," he said.
In his speech, Napolitano noted Berlusconi's call for a coalition, but said the formula had failed in December when the center-right withdrew support from technocrat premier Mario Monti, who had been supported by both right and left.
CONSULTATIONS
Bersani said he would seek broad support from parliament but also from unions and other groups. He met the speakers of parliament on Friday and is due to meet unions and employers on Saturday before meeting political parties next week.
"I will certainly go to work with consultations that are necessary with the forces in parliament but without neglecting contact with the main groups in society," he said.
He gave no indication of how long the process would take but insisted he would not be rushed. "It's a difficult situation but I will take the time needed," he said.
If no durable accord can be reached, Italy faces a return to the polls within months, delaying any prospect of substantial reform to its stagnant economy, stuck in its longest recession in 20 years.
Financial markets have been watching the political uncertainty closely although so far there has been no sign of the panic that gripped investors during the 2011 crisis which brought down the last Berlusconi government.
The main barometer of confidence, the spread between yields on Italian 10-year government bonds and their more stable German counterparts, closed the week at 314 points, well short of the level of more than 550 seen in late 2011.
However Italy's 2-trillion-euro ($2.60-trillion) public debt is vulnerable to any bond market turbulence and public finances have deteriorated sharply during the recession, despite the tax hikes and spending cuts imposed by Monti.
Napolitano said Italy must move quickly but carefully to form a government capable of addressing deep economic and social problems. He said the election had shown there was discontent with traditional politics in Italy and called for national unity and an end to paralyzing conflict between the parties.
Time is running out, however. Apart from the pressure from financial markets, parliament must begin the process of electing a successor for Napolitano by mid-April in time to complete the process by the time his term ends on May 15.
The head of state rejected suggestions that the process of forming a government was taking too long. A month has passed since the election but Napolitano said the country was moving as quickly as possible within constitutional restraints.
Underlining the tense political climate, the PDL is due to hold a rally on Saturday to protest against two trials Berlusconi faces over his appeal against a tax fraud conviction and separate charges of paying for sex with a minor.
($1 = 0.7694 euros)
(Additional reporting by Naomi O'Leary; Editing by Michael Roddy)
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