By Elisa Forte

MESAGNE, Italy (Reuters) - Police investigating the school bomb attack in the southern Italian city of Brindisi have closed in on a suspect they believe set off the device that killed a 16-year-old girl, sources close to the investigation said on Monday.

Prosecutors believe they know the identity of a man shown in surveillance video footage apparently activating a remote control that set off a bomb rigged up from gas canisters as students were arriving for lessons on Saturday.

He had disappeared but officials said police questioned seven people, including the man's brother, after a raid in the Sant'Elia district of Brindisi, not far from the Francesca Morvillo Falcone school where the attack took place.

However Cataldo Motta, head of the anti-mafia unit in Lecce, which is working on the investigation, denied local media reports that the suspect had been arrested.

Fuzzy pictures of the middle-aged man, wearing a dark coat, light colored trousers and fashionable-looking shoes, were printed in local Brindisi newspapers on Monday.

The move forward in the investigation came on the day the funeral of Melissa Bassi was held in her home town of Mesagne, just outside Brindisi.

Prime Minister Mario Monti cut short a visit to a NATO summit in the United States to attend the funeral, which comes as Italy has been shaken by a series of attacks on state institutions including the main tax collection agency.

The teenager was killed and 10 others were hurt when the bomb exploded just outside the vocational institute in the Adriatic port city.

Initial suspicions focused on organized crime, largely because the school was named after the wife of the murdered anti-mafia judge Giovanni Falcone, but investigators now think it was probably carried out by a lone bomber.

"QUESTION OF HOURS"

"People should not be afraid. The fate of the bastard who did this is sealed," the mayor of Brindisi, Mimmo Consales told reporters after the service. "It is only a question of hours."

"I'm not very interested in his name. I want to know why he did it," he said.

In a sign of tension in the city, after the funeral police had to stop youths from attacking a man they mistakenly believed had something to do with the bombing.

Although no motive for the Brindisi school attack has been established, Monti's presence, alongside a number of other senior political leaders, underscored the wider resonance of a crime that horrified Italy.

With the country already mired in recession and grappling with a deep economic crisis and a loss of confidence in most of its political institutions, the attack on a school was a sickening shock, made worse by a deadly earthquake which hit northern Italy on Sunday.

In hot sunshine, thousands of people filled a square and surrounding streets in Mesagne, where a giant video screen relayed the service in the church.

Most of those injured in the blast suffered burns from the gas explosion and one other girl, 15-year-old Veronica Capodieci, is still in serious condition in hospital.

Although there appears to be no link with recent attacks on tax agency Equitalia or with the shooting of the head of engineering group Ansaldo Nucleare, claimed by an anarchist group, the Brindisi bombing has added to fears of a possible return of political violence in Italy.

Interior Minister Anna Maria Cancellieri met local officials to discuss a security crackdown involving hundreds of police drafted from outside the region in an operation coordinated with anti-mafia and anti-terrorism services.

(Additional reporting by Daniele Mari, Writing by James Mackenzie; Editing by Michael Roddy)