"The fact that in Italy there is a sort of widespread horror for any hypothesis of accord, alliance, mediation or convergence among different political forces is sign of a regression," Giorgio Napolitano said in his inaugural address.
Politicians have flagrantly ignored Italian voters' demands for greater transparency, moral courage and significant political spending cuts, he told parliamentary lawmakers Monday.
He called the parties' refusal to consider reforms "unforgivable."
He also said the protracted economic crisis in Italy was a result "of a long series of omissions and flaws, closures and irresponsibility."
Napolitano scolded party leaders for irresponsible politics that kept him in office, saying he had hoped to retire at the end of his seven-year term in May, reminding them he was 87 years old.
But he said he gave in when squabbling party leaders begged him to stay on after two months of "fatal deadlock" and an internal party revolt. Presidents of Italy are chosen by Parliament.
"I could not decline," he said to loud applause. "I was worried about the fate of the country."
He said he agreed to serve again, only on the condition that party leaders act responsibly and "with realism."
Otherwise, Napolitano warned, if the parties act as they have for two months and fail again to form a government, he would dissolve Parliament, call new elections and possibly resign.
"I must be frank: If I find myself again in front of the deafness with which I have clashed in the past, I will not hesitate in drawing the consequences in front of the country," he said.
Italy has been stuck in political gridlock after a Feb. 24-25 general election produced a Parliament divided into three major camps with none able to assemble a governing coalition.
In the lower Chamber of Deputies, the center-left Italy Common Good alliance, led by the Democratic Party, got the most votes by a narrow margin -- but party leader Pier Luigi Bersani couldn't swing enough lawmaker support afterward to form a governing majority or to elect one of his candidates as president. He resigned last week.
The center-right alliance of former Prime Minister Silvio Berlusconi came in second, and the new, anti-establishment Five Star Movement of comedian Beppe Grillo was third, with 25 percent of the popular vote.
Grillo's movement beat out a centrist coalition of outgoing Prime Minister Mario Monti.
Grillo has refused to ally with any traditional political party, saying his party support came from voter calls for change.
In the Senate, no political group or party won an outright majority, resulting in a hung Parliament.
Napolitano appointed a group of advisers last month to determine Italy's most urgent political and economic measures. He said Monday the advisers' recommendations could serve as new government guidelines.
He also said he would meet with political leaders from both houses and party heads Tuesday to discuss forming a new government and naming a prime minister.
He said one of the first things he would also ask lawmakers was if their political positions had changed since earlier talks that ended in stalemate.