Italian prime minister meets with president before dissolving parliament

Italian Prime Minister Paolo Gentiloni was meeting President Sergio Mattarella on Thursday in the first formal step ahead of the dissolution of parliament which is necessary before an election can be called, a government source told Reuters.

Gentiloni went to the president's palace at 3 p.m. (1400 GMT), said the source, who asked not to be named.

After the meeting with Gentiloni, Mattarella is expected to summon the speakers of the two houses and then dissolve parliament. Gentiloni's cabinet will then set the date of the election, which is widely expected to be March 4.

Earlier on Thursday Gentiloni defended the record of his year-old government and said he would remain in office and ensure continuity "until a new government is in place."

Speaking at the prime minister's traditional end of year news conference, he appealed to political parties not to spread fear and make unrealistic promises in the "imminent" election campaign.

"I think it is in the interests of the country to have an election campaign that limits as much as possible the spreading of fears and illusions, these are the risks we have before us," he said.

All Italy's main parties are promising to raise the budget deficit and slash taxes despite record high public debt, and immigration is set to be a central theme of the election, with right-wing parties frequently warning of a migrant "invasion."

With opinion polls pointing to a hung parliament, Gentiloni said Italy should be prepared to deal with instability but should not fear it, noting that it was now common to many European countries.

"We mustn't dramatize the risk of instability, we are quite inoculated against it," he said, in reference to Italy's frequent changes of government, adding that elsewhere in Europe there has been "an Italianisation of political systems."

The anti-establishment 5-Star Movement leads opinion polls with about 28 percent of the vote, followed by the ruling Democratic Party (PD), of which Gentiloni is a member, on around 23 percent.

However, most seats in parliament are seen going to a conservative alliance made up of Silvio Berlusconi's Forza Italia (Go Italy!) on around 16 percent and the right-wing Northern League and Brothers of Italy, with 13 and 5 percent respectively.

The PD's support has been falling, hurt by banking scandals and internal splits, and there has been speculation that Gentiloni may take over from its leader Matteo Renzi as its candidate for prime minister at the election.

Gentiloni, whose popularity ratings are higher than Renzi's, refused to be drawn on this, but advised the PD to reject populism and run a sober campaign as "a tranquil party of government."

"This is the message the PD has to give, and if it does so I think it will regain support," he said.

(Additional reporting by Isla Binnie; Editing by Alison Williams)