ROME - The neo-Fascist National Alliance and the Northern League reached a preliminary agreement yesterday for a federal Italy with a strong presidency in a move that could get stalled coalition talks going again.

The two parties, members of the election-winning Freedom Alliance of the media tycoon, Silvio Berlusconi, agreed that Italy's constitution had to be rewritten and its changes put to a referendum. 'We're on the elevator that leads from purgatory to paradise,' said Giuseppe Tatarella, of the neo-Fascist delegation that held talks with the League.

Mr Tatarella said the idea was to get the next government to prepare the constitutional reforms, propose them to parliament and then call a referendum.

The Northern League and the National Alliance are the two main partners of Mr Berlusconi's Forza Italia party in the Freedom Alliance, which swept to power in last week's elections. Since then all three election- winning allies have done little more than trade insults with the League leader, Umberto Bossi, who branded the National Alliance the 'Gallows Party' and Mr Berlusconi 'Berluskaiser'.

But the League broke the ice on Thursday when Mr Bossi held unexpected talks with the National Alliance head, Gianfranco Fini, about federalism. Constitutional experts of the two parties then met in Rome yesterday and worked out the federalism idea. Mr Bossi and Mr Fini did not attend yesterday's meeting.

The neo-Fascists have traditionally favoured a strong central state but recently said they would agree to decentralisation. 'The climate is extremely positive,' said Francesco Speroni, the League leader in the Senate, the upper house of parliament. 'We're putting the criteria and procedures together and the academics are talking at the moment. Any problems could emerge when we start discussing at a political level.'

The outcome of the meeting boosted hopes that the Freedom Alliance would form a government despite the week of bickering.

The talks with the League are only about its demands for federalism and not aimed at forming a government. But political commentators said any agreement on federalism would pave the way for the reopening of government talks.

Mr Bossi met Italy's President, Oscar Luigi Scalfaro, for talks, but his office declined to say what they were about. Mr Scalfaro cannot nominate a prime minister-designate to try to form a government until parliament convenes on Friday, and the two houses each choose a speaker whom the President can consult.

Mr Berlusconi has backed the idea of federalism. 'We are available to hold talks to decide the timing and manner of urgent institutional reforms to which the next government would be committed,' he said in an interview in L'Indipendente newspaper yesterday.