UPDATE 1-Italy's PD opts for opposition as president seeks coalition

(Adds Berlusconi meeting president)

ROME, April 5 (Reuters) - Italy's centre-left Democratic Party (PD) plans to remain part of the opposition in the new parliament and not join any coalition government, the PD's acting secretary Maurizio Martina said on Thursday.

"The negative election result does not allow us to formulate government solutions that include us," Martina said after meeting President Sergio Mattarella, who is trying to stitch together a new government after an inconclusive March 4 vote.

In the election, a centre-right alliance taking in the far-right League and former prime minister Silvio Berlusconi's Forza Italia won the most seats, followed by the anti-establishment 5-Star Movement, with the PD a distant third.

No group can govern alone leaving the euro zone's third largest economy in political deadlock. Financial markets are taking the stalemate in their stride for now, but investors fear a possible tie up between the League and 5-Star which are both hostile to European Union budget deficit restrictions.

The 5-Star wants to forge a German-style coalition pact with either the League or the PD, but both groups have rejected its overtures so far and a source in the president's office has said it might take many weeks to find a solution.

Martina said it was up to the 5-Star and centre-right bloc to govern together. The 5-Star has ruled out working with Berlusconi, who has been convicted of tax fraud, saying his style of politics had proved to be a failure.

After his own meeting with Mattarella, Berlusconi said he had told the president the next government should be led by the centre-right, with the largest party in the bloc, the League, at its helm.

He made clear he was not willing to embrace the 5-Star, which emerged from the polls as the largest single party in Italy, denouncing it in the same terms he had used in the recent electoral campaign.

"We are not open to government solutions in which envy and social hate, poverty politics and judicial witch hunts are the cornerstone," he said.

"Such a government would put our country in grave difficulty in Europe and would ignite a recessive spiral with rising unemployment, high taxes, flight of businesses and capital, chain bankruptcies starting with the banking sector."

League leader Matteo Salvini and 5-Star head Luigi Di Maio are due to meet Mattarella later in the day, concluding this first round of consultations.

There are few expectations that the president will be able to put forward a possible new prime minister this week, and he is likely to bide his time and hold a second round of discussions later this month.

Martina said Italy needed to focus on four main points -- controlling public finances, managing migration flows, bolstering international alliances and fighting poverty including by strengthening the welfare system.

This last point is a rallying cry for the 5-Star, although Martina dismissed their proposal for a universal income of up to 780 euros ($957) a month as unrealistic. ($1 0.8151 euros) (Additional reporting by Steve Scherer; editing by David Stamp)