Italy's octogenarian president may be called to rescue again

* Chooses leaders who inspire confidence internationally

* May be called on to muster another government

* Says he wants to avoid snap election

By Steve Scherer

ROME, Sept 30 (Reuters) - Italy's 88-year-old president, Giorgio Napolitano, is an unlikely hero, but this week marks the third time in two years that he may be called to the country's rescue.

Just five months into his unprecedented second term as president, Napolitano is facing a potential political crisis in the euro zone's third-biggest economy that has already roiled financial markets.

Centre-right leader Berlusconi ordered his five ministers out of Prime Minister Enrico Letta's fragile right-left coalition government on Saturday, and parliamentary votes that could usher in a full-blown crisis are expected on Wednesday.

For the moment, Letta is holding onto his job and fractures within Berlusconi's party appear to give hope that his government could survive the confidence votes.

The 77-year-old Berlusconi, who has dominated Italian politics for two decades, is fighting for his political survival after a tax fraud conviction last month.

Berlusconi is pushing for an election just seven months after February's inconclusive national vote after the ruling, which will exclude him from parliament and severely limit his ability to lead his Forza Italia party.

Italian presidents have been little more than ceremonial figures in the past, ribbon-cutters and authors of patriotic speeches, but some argue Napolitano has done more to save the country from financial ruin than anyone else.

"He's Italy's financial saviour because he has chosen and worked with those who have the confidence of the international markets," said James Walston, a political analyst at the American University in Rome.

The irony is that Napolitano once did not even believe in the free-market economy. If Italy's 88-year-old hero wore a cape, it would be red.

Napolitano joined the Italian Communist Party (PCI) in 1945, before the official end of the war, and first entered parliament in 1953.

In 1978, he was the first high-ranking leader of a communist party to visit the United States, a trip that earned the Naples-born apparatchik the nickname "o Americano" for his diplomatic role as the party's North Atlantic ambassador.

After the U.S. involvement in the bombing of Libya in 2011, President Barack Obama called Napolitano, not then-Prime Minister Berlusconi, to thank him for Italy's support for the operation because the premier had opposed aiding the rebellion against his personal friend, Muammar Gaddafi.

Recently the powerful president has been affectionately referred to as "King George" and he has repeatedly lambasted today's politicians for lacking mutual respect for political rivals - to no avail.

LIMITED POWERS

One of the few powers the president has is to choose a potential government leader after an election or when there is a crisis. The other is to dissolve parliament and induce elections.

If Letta's government does collapse, Napolitano will first have to see if parliament is capable of supporting another administration, with Letta or another at its head. If he fails, he will have to dissolve parliament, which he has made abundantly clear he would like to avoid.

When Italy was mired in the euro zone debt storm two years ago, it was Napolitano who pushed the discredited Berlusconi to step down and make way for Mario Monti, a former European commissioner held in high regard in capitals across the region.

After the February vote gave no single force in parliament enough votes to govern and markets again became uneasy, Napolitano reluctantly yielded to the pleas from the right and left to accept a second mandate.

Then he picked Letta, a 47-year-old moderate well known by investors and European leaders, as the man to lead the awkward coalition of former rivals in the 64th Italian government since World War Two.

At a conference commemorating a leading Italian economist and friend of the president's who died earlier this year, Napolitano reminisced about the way Italian politics, though always unstable, used to be.

"The differences and the conflicts over ideas between the majority and the opposition did not cause confusion about the notion of civil debate and decorum," he said.

Reflecting on growing old "and noticing the vacuum left by those dear people who have, one by one, passed on," the president broke into tears.