As Italy's president calls the country's politicians and a group of leading economic figures together to find a solution to political crisis in the country, analysts are questioning whether 10 "wise men" can save Italy from new elections later this year.
President Giorgio Napolitano is due to meet with a committee of advisors at the Quirinale Palace in Rome on Tuesday in the latest attempt to find a solution to Italy's political impasse. The so-called group of 10 "wise men," which includes a central bank official, lawmakers and politicians from the center-left and center-right blocs, has been asked to propose urgent measures that could be backed by all parties to put economic reforms back on track.
The group, which was called together last week, is meeting for the first time on Tuesday and is expected to announce measures such as cutting the cost of the bloated political system and replacing the widely criticized electoral law to avoid a repeat of the deadlock in future elections.
Italy has been effectively leaderless since an inconclusive election in February in which no political party won enough seats to govern independently. Bickering between the country's leading politicians has prevented any alliances being formed so far, delaying much-needed reforms in Italy.
Italy's center-left leader, Pier-Luigi Bersani, was asked by Napolitano to see whether he could receive broader political support needed for a mandate to govern, but has been unsuccessful so far. Comic Beppe Grillo, head of the anti-establishment "Five Star Movement," has refused to form a coalition with Bersani, who has in turn refused to countenance an alliance with the head of the center-right bloc, Silvio Berlusconi.
Analysts at Barclays on Monday said that new elections would have to be held later this year, despite current attempts to resolve the political impasse. "Our baseline case remains that the president will try to form a grand coalition led by an independent candidate with a fairly narrow mandate focusing on electoral law reform," a research note from Barclays said on Monday.
"We do not expect new elections before the third quarter this year, but it is too early to predict whether the electoral system will be reformed as to reduce the risk of another political impasse after the election," the note continued.
Nick Spiro, head of Spiro Sovereign Strategy, told CNBC that Italy had become "ungovernable,"
"Italy is suffering from a toxic combination of depression economics and debilitating politics. The country is likely to remain mired in recession for some time yet and has become ungovernable," Spiro said.
"The question is: why aren't markets demanding a significantly higher risk premium? In our view Italian debt is still benefiting from the signalling effect of the ECB's bond-buying program, coupled with a fair amount of 'crisis fatigue' on the part of investors," Spiro added.
After markets opened on Tuesday, the FTSE MIB was the only major European index posting declines, down 0.4 percent and the yield on Italian 10-year bonds fell 6 basis points to 4.7 percent.
(Read More: Why Italy Could Be the Next 'Bad Boy of Europe')
"I think this council of ten wise men is something that is really designed to gain some more time," Alberto Gallo, head of European Macro Credit Research at RBS, told CNBC. "Politicians should get together to form an agreement but, realistically, it is unlikely. The group will identify a couple of weak reforms that a coalition government could do, but it will be a weak coalition. There will be harder reforms that need to be done—like the labor reform, for example."
"The coalition government could fall and I still expect new elections to be announced before year end," Gallo added. "The political gridlock will become economic gridlock eventually. Today unemployment was down by 0.1 [percentage points] to 11.6 percent in Italy but we think the number [of unemployed] will continue to go up," he added.
Holgar Schmieding, chief economist at Berenberg Bank, told CNBC's "Worldwide Exchange" that the Italians were following the adage that "if you can't solve a problem, form a committee."
Though the aim of the meeting is to find shared ground and compromise between the main political parties, there is skepticism in Italy too about what the "wise men" can realistically achieve. Either a political government is born quickly, Berlusconi ally Maurizio Gasparri said, or "we do what comes naturally in a democracy, return to the polls," he told Sky TG24 TV on Monday. "Let hope it's not just a delaying tactic" Gasparri added.
Others, such as former European Commissioner Emma Bonino, have criticized the absence of women from the panel. "Can you imagine if the president picked 10 women?" Boninon told Radio Radicale. "Everybody would have said, 'There's something wrong here.'"