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Italian President Giorgio Napolitano is considering ways out of an acute political crisis after ex-PM Silvio Berlusconi’s ministers left the coalition government.

Giorgio Napolitano hinted that he would try to oversee the formation of a new coalition without calling elections.

This follows weeks of worsening ties between Silvio Berlusconi’s party and PM Enrico Letta’s centre-left grouping.

Silvio Berlusconi had already threatened to withdraw his ministers if he was expelled from the Senate for tax fraud.

The current coalition government was put together after inconclusive elections in February, and the latest developments cast a further shadow over Italy’s struggling economy, the eurozone’s third-largest.

It is feared that the crisis could hamper efforts to enact badly-needed reforms to tackle Italy’s economic problems, including debt, recession and high youth unemployment.

The IMF has warned that coalition tensions represent a risk to the Italian economy.

Italian President Giorgio Napolitano is considering ways out of an acute political crisis after ex-PM Silvio Berlusconi's ministers left the coalition government

Italian President Giorgio Napolitano is considering ways out of an acute political crisis after ex-PM Silvio Berlusconi’s ministers left the coalition government

Speaking on Saturday, Giorgio Napolitano called for political continuity in the country.

“We need a parliament that discusses and works, not that breaks up every now and then,” he said.

“We do not need continuous election campaigns, we need continuity of the government’s actions, decisions and its measures to resolve the problems of this country.”

Later on Sunday, Giorgio Napolitano is expected to meet Enrico Letta, and their talks will be closely watched for the first indications as to how this crisis will play out.

Enrico Letta, of the centre-left Democratic Party, warned late on Friday that he would quit unless his coalition cabinet won a confidence vote due next week.

Silvio Berlusconi pre-empted that, describing Enrico Letta’s comments as “unacceptable”. He later said all five ministers of his People of Freedom (PDL) party were resigning.

The PDL is objecting to a planned increase in sales tax, which is part of wider government policy to reduce big public debts.

Interior Minister and PDL Secretary Angelino Alfano accused Enrico Letta of “a grave violation of the pacts that this government is founded on”.

But the prime minister responded angrily to the resignations, accusing the PDL leader of telling Italians a “huge lie” in using the sales tax as an alibi for his own personal concerns.

“In parliament, everyone will have to assume responsibility for their actions before the nation.”

Silvio Berlusconi’s legal problems are seen as a cause of much of the tension inside the coalition.

A committee of the Senate decides next week if he should be expelled after the Supreme Court recently upheld his conviction for tax fraud.

It was his first conviction to be confirmed on appeal in two decades of fighting legal cases.

Silvio Berlusconi was sentenced to a year in jail, but is expected to serve house arrest or community service because of his age.

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Israel’s PM Benjamin Netanyahu has reached a deal to form a new coalition government.

Benjamin Netanyahu’s Likud-Yisrael Beitenu alliance signed the agreement with the centrist Yesh Atid and the pro-settler Jewish Home, the parties in the coalition say.

It is the first time in a decade that an Israeli coalition government will not include any ultra-Orthodox groups.

The deal follows weeks of deadlock since Benjamin Netanyahu’s election win on January 22.

It comes a day before a deadline passes for Benjamin Netanyahu to legally form a coalition.

“The prime minister welcomes the coalition agreements that have been signed between the Likud and Yisrael Beitenu (on one side) and the Yesh Atid party and the Jewish Home,” a statement from Benjamin Netanyahu’s office said.

“On Saturday evening, the prime minister will inform President Shimon Peres that he has completed the task” of forming a government.

The government is expected to sworn in on Monday, two days before a visit by President Barack Obama.

Israel’s PM Benjamin Netanyahu has reached a deal to form a new coalition government

Israel’s PM Benjamin Netanyahu has reached a deal to form a new coalition government

According to Israeli media reports, there will be 22 ministers, making it the smallest government in decades.Likud will reportedly run the interior ministry, while Yesh Atid has secured five portfolios – including finance and education – and Jewish Home will have three.

In the new cabinet, it is believed Yair Lapid – a former TV presenter who leads Yesh Atid – will be finance minister and Jewish Home’s Naftali Bennett, a high-tech millionaire, will be economic and trade minister.

After tough negotiations, it was apparently decided that Yair Lapid’s deputy, Rabbi Shai Piron would take the education portfolio while Likud would have the interior ministry.

Benjamin Netanyahu is expected to act as foreign minister while Avigdor Lieberman, who leads his partner Yisrael Beitenu, faces charges of fraud and breach of trust in a trial.

The defence ministry will be headed by former IDF chief of staff, Moshe Yaalon, a Likud member.

Tzipi Livni, whose Hatnua party holds six seats, will be justice minister and chief negotiator in talks with the Palestinians.

In total Benjamin Netanyahu will control 68 Knesset seats.

The opposition will consist of Labour, the third-biggest party in the parliament with 15 seats, the ultra-Orthodox and Arab parties and centrist Kadima.

One of the first challenges for the new government will be passing the 2013 budget which will include austerity measures.

Benjamin Netanyahu called for an early election last October because he said bickering among his coalition partners made it impossible to pass a “responsible budget”.

During the drawn-out coalition talks, Yair Lapid and Naftali Bennett formed a pact and got commitments to a new draft law that will compel more ultra-Orthodox men to perform national military service or other civilian duties.

Sharing the “social burden”, as it is known, was a contentious issue in the election.

Many secular Israelis object to the exemptions from army service given to students at religious seminaries or yeshivas and to the large state subsidies that their institutions receive.

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