Italy's president warns of "fatal deadlock" Re-elected Italian president Giorgio Napolitano reviews a guard of honour outside the parliament in Rome Giorgio Napolitano, Italy's 87-year-old head of state elected by parliament for a second term, has delivered a powerful message to the country's political parties to end two months of "fatal deadlock" and agree on a coalition government within days. Choking back tears in his inauguration address on Monday as he expressed his reluctance to accept an unprecedented second mandate, Mr Napolitano slammed the parties for their failure to reach agreement and for the "unforgivable" lack of political reforms. He implicitly threatened to resign if no government materialised. Markets on Monday drove down Italy's cost of borrowing while the banking sector rose strongly on the Milan bourse in a sign of confidence that Mr Napolitano would end the impasse resulting from February's inconclusive parliamentary elections. However, politicians warned that tough negotiations lay ahead and that a broad coalition between the centre-left and centre-right was not a done deal. Mr Napolitano was expected to start consultations with party leaders on Tuesday. "The fact that in Italy there is a sort of widespread horror for any hypothesis of entente, alliance, mediation or convergence among different political forces, is sign of a regression," he went on, warning of the danger of "ungovernability, at least for this legislature." His message appeared aimed at the centre-left Democratic party which narrowly won a majority in the lower house but not in the senate, and has refused to contemplate sharing power with the centre-right led by former prime minister Silvio Berlusconi. The Democrats" entire leadership resigned at the weekend after a devastating internal party revolt twice torpedoed the election of the party's choice of head of state to succeed Mr Napolitano, whose seven-year term was to expire in May. Faced by the prospect of prolonged political instability, party secretary Pier Luigi Bersani - joined by Mr Berlusconi and Mr Monti - appealed to Mr Napolitano, a widely respected former communist, to accept a second term. But with the Democrats left rudderless and in disarray, it is unclear whether the party has the cohesion to support a broad coalition with Mr Berlusconi. One alternative would be for Mr Napolitano to nominate a second technocrat prime minister to replace Mr Monti, but Mr Berlusconi on Monday reiterated his demand for a seat at the table. Mr Napolitano laid out a broad agenda of institutional reforms, including a new electoral law, and measures to lift Italy out of its longest postwar recession. As head of state he has the powers to dissolve parliament and call new elections, but instead he indicated that he would resign, a move that would plunge Italy into deeper political chaos. "I must be frank, if I find myself again in front of the deafness with which I have clashed in the past, I will not hesitate in drawing the consequences in front of the country," he declared. Mr Napolitano also directed a warning at the anti-establishment Five Star Movement, which rocked the mainstream parties by capturing a quarter of votes in the elections and becoming the third largest force in parliament. Mr Napolitano welcomed the new arrival but warned against a "confrontation of the piazza and parliament," two days after Beppe Grillo, the comic-activist leader of the movement, threatened to take "millions" into the streets in protest against the election of Mr Napolitano, calling it a "coup d"état."