Divided Italy headed for another election

A call by the Italian president for a "neutral" government has been opposed by the two largest parties, with the likelihood of another election in July.

Italian President Sergio Mattarella. Source: AAP

President Sergio Mattarella has called for Italy's bickering parties to rally behind a "neutral government", saying the only alternative would be a swift re-vote after March's inconclusive election.

However, Italy's two largest parties, the far-right League and anti-establishment 5-Star Movement, rapidly came out against the proposal, raising the likelihood of an unprecedented immediate return to the polls, even as early as July.

Italy has been stuck in political limbo since the March 4 ballot, which saw 5-Star emerge as the single largest group while an alliance of rightist parties, including the anti-immigrant League, took the most seats.

Both fell short of an absolute majority, and, after a third round of consultations with all the main party leaders, Mattarella conceded on Monday that there was no room for a coalition deal in the eurozone's third-largest economy.

However, he urged politicians to rally around a "neutral" administration, which he will appoint this week.

If it gains parliamentary backing, it will draw up a 2019 budget to stave off the threat of an automatic increase in sales taxes that would be triggered if the deficit slips. It would then resign in December to open the way for elections in the (northern) spring - when all post-war votes have been held in Italy.

President Mattarella asked parties to decide between giving the government full power or holding another election in July. Source: AAP

"Let the parties decide of their own free will if they should give full powers to a government ... or else new elections (should be held) immediately in the month of July or the fall," Mattarella said in a televised statement on Monday.

Both the League and 5-Star, which have enough seats between them in parliament to prevent any government from winning the confidence votes needed to take office, rejected the formation of a non-partisan administration.

"(We have) no faith in a "neutral government", which is synonymous with a government of technocrats. We are going to vote in July," 5-Star chief Luigi Di Maio wrote on Twitter.

League leader Matteo Salvini echoed the sentiment: "There is no time to lose, there is no space for technocrat government."