Prodi's two-and-a-half-year-old centre-left government collapsed last Friday in a failed vote of confidence after losing the support of the hardline Communist Refoundation party.

With pressure on Italy to pass a cost-cutting 1999 budget meeting requirements of the European common currency, Scalfaro had asked Prodi to make a stab at forming a new government. However, Prodi said today that ``my assignment proved impossible.''

Scalfaro can now ask someone else to try to form a government or he can call early elections. Most observers think elections are unlikely. ``I hope Italy will soon have a stable government and a cohesive majority,'' Prodi told reporters after his meeting with the president.

Prodi headed Italy's 55th government since World War II and, at two-and-a-half years, its second longest-lasting.

The premier hadbeen looking to a small centre-right party with 29 votes to help him put together a new majority. However, the Democratic Union for the Republic, led by ex-president Francesco Cossiga, rejected his overtures last night.

Many political observers are speculating that Scalfaro might now turn to an apolitical premier to shepherd through the budget and the debut of the euro, the common european currency.