* President has key role in Italian politics
* PM Draghi wants job, some parties against it
* PD, 5-Star say will cast blank votes in first round
* Voting may take several days (Adds PD, 5-Star to cast blank ballots, comment, background)
By Angelo Amante and Gavin Jones
ROME, Jan 24 (Reuters) - Italy's parliament will begin voting on Monday for a new head of state, with Prime Minister Mario Draghi among the most prominent candidates in a wide-open contest which will be closely monitored by financial markets.
There are concerns among politicians in Italy that the result could trigger fresh political uncertainty in the euro zone's third largest economy, which is facing a resurgence of COVID-19 infections and deaths.
The head of state is responsible for resolving political crises, making it a key role in a country where governments survive just one year on average. The president has the final say in nominating prime ministers and other cabinet members.
In a process that could take several days, more than 1,000 parliamentarians and regional representatives will convene at 1400 GMT for the first round of secret voting to replace the outgoing President Sergio Mattarella.
The winner needs a two-thirds majority in any of the first three rounds, with an absolute majority enough thereafter.
Draghi, who leads a national unity administration, has made clear he would like the job, which has a 7-year term. But there is a reluctance among some parties to back him for fear his departure could trigger political turmoil and an early election.
"At this difficult moment, it would be dangerous to remove Draghi from the post of prime minister," rightist League leader Matteo Salvini said on Sunday, echoing similar remarks made by his coalition partner Silvio Berlusconi.
Since neither the centre-right nor the centre-left have enough votes to impose a candidate from their own camp, a compromise is likely to be needed to prevent a stalemate.
Such a deal still looks elusive, meaning the first voting round on Monday is highly likely to be inconclusive.
The leaders of both the 5-Star Movement and the centre-left Democratic Party (PD) said on Sunday their lawmakers would cast blank ballots, a way of playing for time while cross-party negotiations continue.
Berlusconi pulled out of the race on Saturday. The centre-left had ruled out backing the former prime minister, who was unlikely to muster the broad support traditionally needed.
If Draghi were to become head of state, a deal on another prime minister would be immediately needed to ensure that instability does not jeopardise Italy's drive to receive some 200 billion euros ($226.80 billion) of EU pandemic relief funds.
Until recently, Draghi was considered the hot favourite to move to the presidential palace.
With Salvini and Berlusconi now both calling for him to stay on as premier for the remaining year of the government's term, his chances seem to have diminished, but he remains among the front runners.
With negotiations conducted mainly behind the scenes, politicians' public utterances are often just tactical manoeuvres. PD leader Enrico Letta, a Draghi supporter, said on Sunday he wanted to verify with Salvini whether his rejection of the premier was definitive.
Since Berlusconi's withdrawal, the centre-right parties have made no alternative proposals but Salvini said the coalition was ready to present several "high-profile" names for negotiation.
Among possible contenders are former lower house speaker Pier Ferdinando Casini, former premier Giuliano Amato, Senate speaker Elisabetta Casellati and Elisabetta Belloni, a career diplomat who currently coordinates the secret services.
Mattarella has ruled out accepting another term but some politicians, particularly the PD's Letta, have suggested pleading with him to carry on. ($1 = 0.8818 euros) (Editing by Alexander Smith)
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