ROME (Reuters) - Outgoing Italian Prime Minister Mario Monti and the man most likely to succeed him brushed off Silvio Berlusconi's latest turnaround on Thursday as speculation grew that the billionaire might drop out of the election race.
Monti, speaking in Brussels, refused to comment on former premier Silvio Berlusconi's offer to withdraw his own candidacy in next year's election if the former European commissioner Monti agreed to head a centre-right coalition.
In Rome, Pier Luigi Bersani, head of the centre-left Democratic Party, dismissed the latest change of mind from the mercurial Berlusconi, whose badly divided camp is riven with dissent and trailing badly in the opinion polls.
"Berlusconi will not win," he told foreign journalists in Rome. "He will lose this election and he is trying to save what he can by making himself the centre of a story that will last half an hour so that nobody talks about serious things."
He said the centre left would respect European budget rules and continue Monti's reform agenda.
"We can no longer consider backpedalling on fiscal discipline and credibility," Bersani said.
Berlusconi, 76, has declared he is standing for his fifth term as prime minister, a decision that at first caused nervousness on international markets and fears that he would reverse Monti's economic reform agenda.
With opinion polls suggesting Berlusconi has little chance of winning the election, market reaction has calmed and an auction of three year bonds on Thursday saw the Treasury pay the lowest borrowing costs since late 2010.
The media tycoon, who has a reputation for constantly changing his mind, pulled the latest of a series of surprises on Wednesday, declaring at a book launch that he would drop plans to run if Monti, whom he has attacked fiercely in recent days, agreed to lead the centre right in his place.
Asked about the remark in Brussels, where he was attending a summit of European Union leaders, Monti said it was not the time or place to respond and he was committed to leading the government in the brief time remaining before the 2013 budget is approved and he resigns - probably before Christmas.
Monti said the elections, expected in February after Berlusconi's centre-right People of Freedom (PDL) party withdrew its support for him in parliament, would produce a government committed to Europe.
BERLUSCONI PULLING OUT?
Berlusconi's latest volte-face added to the already high degree of confusion surrounding the election. But behind the headline-grabbing announcement many saw a first step towards the exit.
"He knows he can't be a candidate and he is trying to pull out of the race. This is just a way of covering his retreat," said one party figure, close to a group of pro-Monti moderates who are preparing to form a breakaway centre-right group.
Berlusconi has been struggling to hold his warring People of Freedom party (PDL) together behind a strategy aimed at blaming Italy's deep recession on austerity policies dictated to Monti by Germany and the European Central Bank.
He has sparked a wave of alarm among European leaders at the prospect of a repeat of the chaos and scandal surrounding Berlusconi's last government, forced from power at the height of the financial crisis last year.
The PDL's hopes have faded of securing an alliance with the regionalist Northern League party that could have given it a strong position in the Senate.
"Berlusconi is raising the white flag because the reality of Italy at the end of 2012 is stronger than his illusions," commentator Stefano Folli wrote in business daily Il Sole 24 Ore.
Monti, credited with restoring Italy's international credibility, is under pressure from European leaders, international investors and centrist groups to stand for a second term.
He has not yet decided whether to do so and has merely said he would like to continue influencing political ideas.
Bersani, who backs Monti in parliament but who has been cool on the idea of seeing him run, repeated on Thursday that he expected the former European Commissioner to continue playing some role when his term ends.
"The day after the elections, the first person who I would like to have a conversation with is Monti," Bersani said.
Even if Monti does stand, he is unlikely to defeat Bersani, said Roberto D'Alimonte, a politics professor at Rome's Luiss university and a top expert on electoral systems.
"The only certainty about the upcoming election is that Bersani is going to win hands down," D'Alimonte said.
(Additional reporting By Luke Baker in Brussels; writing by James Mackenzie; editing by Andrew Roche)
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