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Craxi expected to rebound. Italian premier resigns over Achille Lauro hijacking, but is said to have best shot at heading new Cabinet

Italy's government collapsed Thursday, and for the first time the fall was over a question of foreign policy. The resignation of Bettino Craxi, Italy's first Socialist prime minister, followed a hectic week of turmoil over the hijacking of the Achille Lauro, an Italian cruise ship.

Recent events have shown the difficulty of Italy's position in trying to play a mediating role in the Middle East while fulfilling its obligations as a NATO ally.

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``If there is one lesson to be learned from last week,'' says Cesare Merlini of the Institute of International Affairs, ``it's that Italy should be far more cautious in relations with the Palestinians.''

Italy's close relationship with the Palestine Liberation Organization apparently was a factor in Craxi's decision to release Palestinian leader Muhammad Abbas, whom the US says masterminded the hijacking.

The government fell after Defense Minister Giovanni Spadolini and two fellow Republican Party ministers resigned. Mr. Spadolini's basic criticism of the Cabinet was its decision to release Mr. Abbas and the lack of consent on that decision. The coalition parties were not fully consulted on this point, he said, ``and I myself learned of it from the television.''

Mr. Craxi's five-party coalition was Italy's second-longest-serving government since World War II. In another 28 days, Craxi would have broken the record.

There are three possibilities for formation of a new government, according to Giorgio Galli, a political science professor at the University of Milan. The most likely is a new five-party coalition government, headed by Craxi and including the Republicans. Another possibility is a four-party coalition government with Craxi as premier, leaving out the Republicans. A third but improbable option would be a single-party government, initially headed by the Christian Democrats, then followed by early elections .

Analysts here expect Italy's new government to take shape next week. President Francesco Cossiga is expected to ask Craxi to build a coalition after consultations with the various parties. The arrangement would then be put to the Italian Parliament for approval.

In his final speech to Parliament Thursday, Craxi said that Mr. Abbas arrived in Italy aboard an Egyptian plane where he remained for the duration of his stay overnight in Italy.

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As an Egyptian guest on Egyptian territory, Abbas could not be legally transferred to US jurisdiction, according to Craxi.

The prime minister's refusal to hand over Abbas and Abbas's subsequent departure from Italy for Yugoslavia triggered indignation from US authorities and led his own defense minister to resign.

Giovanni Spadolini, who is also secretary of the Republican Party, is known for his antagonism to Craxi's pro-Palestinian foreign policy.

The Republican Party takes a pro-US stance.

``The polemical tone of initial reactions of the American government could not but provoke unpleasant surprise and bitterness for the disregard on the part of a friendly government for all that the Italian government had done to successfully overcome a particularly critical situation,'' Craxi said in Parliament Thursday.

``Our relations with the US have gone back a couple of steps,'' says Professor Merlini.

``But I think if we put in the balance the installation of Euromissile bases in Italy, the defeat of left-wing terrorism, including the release by Italian police of NATO Gen. James Dozier kidnapped in 1981 by the Red Brigades terrorists, and Italy's position as a faithful NATO ally, the balance will still be in our favor.''

The Republican Party's withdrawal from the government has posed two basic questions, according to an editorial in the respected daily, Corriere della Sera. These are the need to define and pinpoint Italy's national interests within the Mideast without losing sight of European and Atlantic commitments, and the increasing need to find some kind of definitive procedure of decisionmaking within a coalition government.

``The longevity of Craxi's government is in its basic composition of noncommunist majority parties gathered under a Socialist premier,'' says Giorgio Galli, a political science professor at the University of Milan.

``The Craxi government accomplishments are not great,'' he says, ``but they have been incisive in unusual areas like the government decree which modified the . . . sliding scale wage index in February 1984 and a series of fiscal measures against tax evaders.

``Probably the most important contribution was Craxi's effective fight against inflation which is now down to 8.5 percent.''


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