Italy was at an impasse on Tuesday after an election seen as crucial for the eurozone failed to produce a clear winner and provided a shock debut for a populist anti-austerity party, rattling world markets and setting off alarm bells across Europe.

Italian stocks plunged and borrowing rates jumped after centre-left Democratic Party leader Pier Luigi Bersani scraped a razor-thin victory in the Lower House of Parliament and the Senate ended up with no political force winning a majority.

A majority in both chambers of Parliament is required to form a government, leaving Italy in a state of limbo that is unprecedented in its post-War history.

Under the Constitution, Parliament has to meet 20 days after an election at the latest, after which formal negotiations begin with Italian President Giorgio Napolitano on forming a government.

The European Commission said it had heard “the message of concern” from Italian voters but expected the country to stick to its pledges of budget cuts and economic reforms.

Silvio Berlusconi’s coalition came a close second in the vote for the Lower House, winning 29.18 per cent of the vote to 29.54 per cent for Mr. Bersani.

A third force — the populist, anti-government Five Star Movement (M5S) of former comic Beppe Grillo — won big, reaping a resounding protest vote from an electorate fed up with austerity policies and a grinding recession to score 25.5 per cent in the Lower House. — AFP