ROME Italy's political parties began manoeuvring on Sunday ahead of elections expected in February as supporters of technocrat Prime Minister Mario Monti sought to cajole him to stay in politics.
Monti has repeatedly said he would not campaign for power, but that he would be willing to serve again as an apolitical premier should the vote result be unclear.
But the premier's unexpected resignation in the face of People of Freedom (PDL) leader Silvio Berlusconi's attacks against his stewardship of the economy are fuelling speculation that Monti is ready to join the race.
Italian "progressives" from the centre-left's Democratic Party (PD) to the Union of the Centre (UDC) "identify with the reasonable and responsible policies Monti has made," UDC leader Pier Ferdinando Casini said on Sunday.
"A large part of civil society does not want to return to the populism and demagoguery of the past. We must give them the political offering they seek."
PD front-runner candidate Pier Luigi Bersani lauded Monti's plan to resign immediately after the passage of the budget, saying it showed great dignity. Bersani won a U.S.-style primary vote last week in which he promised to continue down the path taken by the premier.
The PD leads the PDL by at least 16 percentage points, according to polls from last week.
Berlusconi's campaign against European Union-inspired austerity that was put in place to stem the spread of a debt crisis "risks undermining the painful sacrifices that each Italian has made this year to save the national economy," PD lower house president Dario Franceschini said.
Italians are indeed burdened by the recession, which began mid-way through last year and shows no signs of abating. Many blame Monti's tax increases for making it worse. Unemployment is at a record high and consumer spending has collapsed.
"Eggs and potatoes, eggs and potatoes, that's all we can afford to eat right now," said Roberta Uzzo, who lives near the ancient walls of Rome. "It's a very ugly period. My husband is unable to find any work and with one sole income it's very difficult to go forward."
PDL secretary Angelino Alfano, whose attacks in parliament on Friday Monti said prompted him to step down, defended his party's decision to withdraw its support for the government.
"We think we did the right thing" in declaring Monti's government over on Thursday, Alfano said, "to underscore the struggles that Italians are facing because of the dire economic situation."
The consummate showman Berlusconi bashed Monti's leadership as he declared his sixth bid for power on the soccer pitch of his AC Milan team on Saturday, but Monti stole the scene by resigning later in the day and counter-attacking that "populism" was only a shortcut to winning votes.
Early elections in Italy must not hinder Monti's economic reforms, European Commission President Jose Manuel Barroso warned in an interview with financial daily Il Sole 24 Ore.
"The next elections must not serve as a pretext for putting in doubt how indispensable these measures are," he said in Sunday's edition. "The relative calm on the markets does not mean we are out of the crisis."
Berlusconi's withdrawal of support for the government last week triggered a new rise in 10-year bond yields, the main barometer of market opinion, reversing weeks of steady falls.
The yield on the 10-year BTP stood at 4.5 percent at the end of last week, 323 basis points higher than the yield on lower risk German 10-year Bunds, but much lower than the level of 7.3 percent seen last year.
Much will depend on how investors view the prospect of a potentially messy election campaign and a likely government of the centre-left, led by a former communist.
"From the perspective of international investors, it is worth noting that so far, I have heard nothing from the Bersani camp that would make me worry about Italian reforms or Italy's newly reclaimed place at the table among other leading European or G-7 members," Unicredit global chief economist Erik Nielsen wrote in a note.
Former European Commissioner Monti came to power at the height of the financial crisis a year ago and was widely credited with restoring Italy's credibility with investors and European partners after the scandal-plagued Berlusconi era.
"Whoever governs Italy, a founding member of the EU, is going to have to pursue this course with the same seriousness," European Central Bank executive board member Joerg Asmussen said on Sunday in Germany's Bild newspaper.
Berlusconi's centre-right PDL lags the PD by as much as 20 percentage points in opinion polls, and also trails the anti-establishment 5-Star Movement, which has surged to prominence on a tide of public anger against the mainstream political class.
Italy's four small centrist blocs would draw less than 10 percent of the vote if elections were held today, polls show.
(Additional reporting by James Mackenzie and Hanna; Rantala in Rome and Lisa Jucca in Milan; Editing by Barry Moody and Stephen Powell)
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