Hapless new year for Italy as Dini quits out

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Italy effectively guaranteed yesterday that it would wake up on New Year's morning with a political hangover of gigantic proportions, as its government prepared to resign and politicians blankly asked themselves what on earth will happen next.

The Prime Minister, Lamberto Dini, announced that he would go to the presidential palace this morning to hand in his resignation following the completion of the temporary mandate bestowed on him a little over 11 months ago. The move had been anticipated after approval of the 1996 budget, the last plank of Mr Dini's four-point programme, in the Senate just before Christmas.

But Mr Dini's departure leaves the country not so much with a political crisis as with a political vacuum. Parliament was supposed to have decided by now whether to renew Mr Dini's mandate, approve an alternative government or move to general elections. But, as it turned out, the country's political parties have been startlingly unable to resolve the question, and parliament remains as divided as ever.

Italy thus moves into 1996, and its six-month-long term as president of the European Union, in a state of political chaos every bit as complex as the one it found itself in a year ago, when Mr Dini was appointed in extremis after the resignation of his predecessor, Silvio Berlusconi.

Until a concrete decision is forthcoming, Mr Dini will continue in a caretaker capacity. But the country's inability to put its political house in order, more than three years after the old Christian Democrat-led order collapsed in a heap of corruption scandals, risks seriously damaging its credibility and the prospect of playing a key role in European construction.

"Everything is very fluid. Anything could happen," one government source said this week in an indication of the climate of sheer bewilderment about the future. Even Italy's most revered political commentators, such as the historian and journalist Indro Montanelli or the broadcaster Enzo Biagi, admit they have given up trying to understand what is going on.

Broadly speaking, there are three possible options:

n President Oscar Luigi Scalfaro dissolves parliament and calls a general election. This is the option everyone wants to avoid, because there is no guarantee a new parliament would succeed any better than its predecessor in producing a stable majority to back a government. Elections would also disrupt Italy's EU presidency and further damage the country's credibility in foreign capitals and on the financial markets.

n Mr Dini stays on for six to nine months to see Italy through the EU presidency, further prune its public finances in a last-ditch attempt to join the single European currency, and overhaul the electoral system to make it more workable.

This is probably the most rational option, and the one Mr Dini favours, but could be torpedoed by parliament's fratricidal instincts.

n All parties get together to form a government of national unity, with a two-year mandate to carry out wide-ranging constitutional reforms and perform the necessary economic surgery. Mr Berlusconi proposed this two days ago, egged on by approving noises from the President, but few believe it could hold together for long.