Success in Italy for parties opposed to European Union-backed austerity policies delivered early Tuesday a hung parliament in the eurozone’s third-largest economy, raising the spectre of a prolonged period of political instability.

The news rattled markets. The Milan stock exchange largely erased its gains after initially rising by 3.8 per cent, while the risk differential between Italian and German 10-year government bonds rose to 293 points, after reaching a low of 261.

“Shock vote, there is no majority,” Corriere della Sera, Italy’s biggest daily by circulation, ran on its front-page on Tuesday.

The centre-left squeaked a victory in the Chamber of Deputies, the lower house of parliament, with 29.5 per cent against 29.2 per cent for conservatives led by former premier Silvio Berlusconi, the Ministry of Interior said.

Votes cast by Italians abroad were not included, but they were not expected to influence the final outcome.

The radical protest Five Star Movement (M5S) of comedian Beppe Grillo scored 25.5 per cent — a major success. Excluding coalitions, M5S was the single biggest party nationally, and led over the centre-left and centre-right alliances in five regions.

The centrist grouping of outgoing premier Mario Monti ended up a poor fourth, with 10.6 per cent. Mr. Monti, who raised taxes and introduced unpopular labour and pension reforms in the name of saving Italy from default, was the most pro-EU candidate.

Mr. Grillo and Mr. Berlusconi were his harshest critics, with the comedian even arguing for a referendum on Italy’s eurozone exit.

The outgoing premier put on a brave face, saying his score was “satisfactory,” despite his ally Pier Ferdinando Casini saying last month that they were aiming for 15-20 per cent of the vote.

Victory in the Chamber automatically gave the centre-left a 54-per-cent majority in the Assembly. But missed out on securing control of the upper house, where seats are allocated on a regional basis, because of a convoluted electoral law.

In the Senate, Pier Luigi Bersani’s centre-left won 31.6 per cent, against 30.7 per cent for Mr. Berlusconi. Both sides were expected to scoop up fewer than 120 seats each, whereas the majority threshold is 158. Mr. Grillo was set to win fewer than 60, Mr. Monti around 20.

“It is clear to all that a very delicate situation for the country is opening up. We will manage the responsibility this elections have given us in the interest of Italy,” Mr. Bersani said.

Enrico Letta, a senior member of Mr. Bersani’s Democratic Party, ruled out a fresh round of elections to break the stalemate, contradicting his earlier statements. “Today it does not seem like the road we should follow,” he said.

Mr. Letta acknowledged that voters had “clearly revolted against” recent austerity policies and said that “the credibility of politics had collapsed,” following a flurry of corruption scandals.

The election also took place against the backdrop of a severe recession.

The vote was marked by falling turnout, as out of 50 million eligible voters, about 75 per cent turned up at the polls, compared to over 80 per cent in 2008.

Mr. Grillo predicted that the centre-left and the centre-right would embark on an awkward grand coalition that will last only “six or seven months. They can’t last any longer against us,” he said, indicating that his movement would remain in opposition.

The secretary of Mr. Berlusconi’s People of Freedom (PDL) party, Angelino Alfano, hailed an “extraordinary result,” which “proved wrong” those who thought that the media mogul-cum-politician “was finished.” He refused to be drawn on post-election scenarios.

But Michaela Biancofiore, a PDL candidate, suggested a power-sharing agreement with Mr. Bersani as prime minister and Berlusconi as Italian president. Current head of state Giorgio Napolitano ends his term in May, and parliament will have to vote on his successor.

Mr. Berlusconi was trailing the centre-left by 15-20 points in December and by 5 on February 8, when a pre-election curfew on opinion polls was enforced. He surged on the back of tax cuts promises and pledges to take on Germany on euro austerity policies.

Roberto D’Agostino, founder of the political gossip site Dagospia, speculated last week that Mr. Berlusconi was not interested in governing, but was aiming for a respectable defeat that would give him enough bargaining power to negotiate immunity from prosecution.

The three-time former prime minister is embroiled in three legal cases, including an appeal on a tax fraud conviction and a trial for allegedly exploiting the services of an underage prostitute and abuse of power.

The two days of voting ending Monday also saw regional contests take place in Lombardy, Lazio and Molise, where local administrations had to resign because of scandals. Their outcome was expected to be announced later Tuesday.


Europe holds its breath as Italy votesFebruary 24, 2013

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