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.
Bersani will have to report back to Napolitano as soon as possible on whether he can command a governing majority, something which looks extremely difficult at present.
The center-left leader, whose group won a wafer-thin majority over the center-right of Silvio Berlusconi in the election, said he would seek to form a reform-minded government "with the maximum balance and determination."
The election gave the center-left control of the lower house but left it short of a majority in the Senate, meaning it cannot govern alone.
Bersani has until now insisted he wants to form a government with support from the populist 5-Star Movement and refused overtures from Berlusconi, who wants to form a grand coalition between the two traditional political groups.
But Bersani has been repeatedly and rudely rebuffed by the 5-Star leader, ex-comic Beppe Grillo.
Napolitano referred to Berlusconi's call for a broad coalition but said this 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.
Napolitano said the coalition that supported Monti had been unable to pass essential reforms, particularly changes to an electoral law which is largely responsible for the current impasse.
The dangerous political deadlock in the euro zone's third largest economy coincides with a banking crisis in Cyprus that has revived fears of a renewed bout of financial market turmoil.
Bersani said late on Thursday that he hoped to be able to present a limited program of economic and institutional reforms that could be backed by all forces in parliament.
However the Democratic Party (PD) leader, whose position has come under growing pressure over his failure to convert a 10-point opinion poll lead into a clear election win, faces resistance from the other parties.
Before Bersani was given the mandate by Napolitano, Renato Brunetta, the lower house leader of Berlusconi's People of Freedom party (PDL), said in a radio interview:
"The reality is that whoever gets a mandate to form a new government has to be able to show they have a stable political majority already in place. And at this moment, Bersani can't be that person."
Napolitano, giving an extremely unusual detailed explanation of his decision, said Italy must move quickly but carefully to form a government that could address deep economic and social programs.
He said the election had shown there was widespread discontent with traditional politics in Italy and called for national unity and an end to paralyzing conflict between the parties.
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.
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, now stuck in its longest recession in 20 years.
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.
Financial markets have been watching the political uncertainty closely although there has so far 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 and German 10-year government bonds, has risen since the beginning of the year by some 20 basis points to 320 points, well short of the level of more than 550 seen in late 2011.
However Italy's 2-trillion-euro 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.