In a covered large saucepan cook potatoes in enough boiling water to cover for 5 minutes. Add green beans. Cook, covered, about 5 minutes more or until potatoes are tender; drain. Transfer potato mixture to a large bowl; cool.
For dressing, in a small bowl whisk together oil, vinegar, the water, lemon juice, salt, and crushed red pepper.
Pour dressing over potato mixture. Add prosciutto, basil, and parsley; toss gently to coat. Serve at room temperature.