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Ending a contentious political stalemate that frightened global business leaders, the new Italian Prime Minister, Enrico Letta, has finally formed a rare coalition government that united liberals and conservatives - and included a record number of women and Italy’s first nonwhite ministers - to guide Italy, Europe’s third-largest economy, out of stagnation.

A
frightened global business leaders, the new Italian Prime Minister, Enrico Letta, has finally formed a rare coalition government that united liberals and conservatives - and included a record number of women and Italy’s first nonwhite ministers - to guide Italy, Europe’s
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B
had frightened global business leaders, the new Italian Prime Minister, Enrico Letta, finally formed a rare coalition government uniting liberals and conservatives - and including a record number of women and Italy’s first nonwhite minister - to guide Italy, with Europe’s
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C
had been frightening global business leaders, the new Italian Prime Minister, Enrico Letta, has finally formed a rare coalition government uniting liberals and conservatives - and that include a record number of women and Italy’s first nonwhite minister - to guide Italy, which has Europe’s
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D
had frightened global business leaders, the new Italian Prime Minister, Enrico Letta, finally formed a rare coalition government that united liberals and conservatives - and including a record number of women and Italy’s first nonwhite minister - to guide Italy, which has Europe’s
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E
frightened global business leaders, the new Italian Prime Minister, Enrico Letta, finally formed a rare coalition government to unite liberals and conservatives - and includes a record number of women and Italy’s first nonwhite minister - and to guide Italy, with Europe’s
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Solution

The correct option is B had frightened global business leaders, the new Italian Prime Minister, Enrico Letta, finally formed a rare coalition government uniting liberals and conservatives - and including a record number of women and Italy’s first nonwhite minister - to guide Italy, with Europe’s
A. Yes. Has finally formed is wrong usage. Since the action occurred in the past and also since we need to show the verb sequencing we should use past perfect tense.
B. This option uses past perfect tense correctly. And there is nothing wrong with government uniting... split the sentence into clauses.
the new Italian Prime Minister, Enrico Letta, finally formed a rare coalition government uniting liberals and conservatives – and including a record number of women and Italy’s first nonwhite minister- to guide Italy.

In the above sentence, subject is the new Italian Prime Minister and the verb is formed. The rest of the sentence after government is a verb-ing modifier. Also, both uniting and including must be parallel to each other. Hence this option is correct.

C. Wrong tense usage as in A.

D. No. You have identified the wrong parallel lists. Formed and United are NOT the intended parallel lists. The actual list is Unite and Include. In this option, they are not parallel - United and including.

E. Wrong tense usage. We need past perfect tense to show the sequence of the events. If both the verbs are in past tense they seem to have occurred at the same time. But that is not possible. Hence the action that occurred earlier should be in past perfect tense. Also, "to unite" is NOT parallel to "including". Hence, the wrong answer.

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