This Article is From Feb 26, 2013

Italy at impasse after vote, rattling markets

Italy at impasse after vote, rattling markets

File photo of Italian Prime Minister Mario Monti

Rome: 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.

The Milan stock market plunged nearly five percent in early morning trading and Asian markets tumbled after centre-left Democratic Party leader Pier Luigi Bersani scraped a razor-thin victory in the lower house of parliament but the Senate remained up for grabs.

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

European capitals fear the lack of a clear winner could bring fresh instability to the eurozone's third largest economy after Germany and France and plunge it back into the debt crisis storm.

Silvio Berlusconi's right-wing forces came a close second, winning 29.18 percent of the vote to 29.54 percent for Bersani in the lower house.

"The country which most needs stability will not have a government that lasts for more than a few months," said James Walston, a professor of international relations at the American University in Rome.

Europe's main stock markets slumped with London's benchmark FTSE 100 index dropping 1.49 percent, Frankfurt's DAX 30 retreating 1.17 percent the the CAC 40 in Paris plunging 2.79 percent.

Asian markets were also sharply down, with Tokyo tumbling 2.26 percent, Shanghai down 1.40 percent and the euro falling against the yen, after US stocks closed sharply lower with the Dow Jones Industrial Average down 1.55 percent.

A third force -- the populist, anti-government Five Star Movement 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 percent in the lower house.

The big loser was outgoing prime minister Mario Monti, who was drafted to run a technocratic government in the debt-strapped country after Berlusconi was ousted at the height of the financial crisis in 2011.

In contrast to Grillo's shock success, Monti won just 10.56 percent in the lower house, the Chamber of Deputies. While he won praise in Europe, he was increasingly criticised at home for his austerity measures.

A victor's bonus will give the left a handy majority in the lower house, the Chamber of Deputies.

But in the 315-seat Senate, neither left nor right has mustered a majority, with Berlusconi's People of Freedom winning 116 seats and Bersani's Democratic Party winning 113.

"Boom for Grillo, Italy Ungovernable", screamed the headline in the left-leaning La Repubblica daily.

The elections spelled a "victory for a euro-sceptic Italy in the face of the policy of economic rigour," said an editorial in Italy's leading daily Corriere della Sera.

"This is fantastic! We will be an extraordinary force!" Grillo said Monday, warning mainstream politicians they would "only last a few more months."

"We'll have 110 people in parliament and we'll be millions outside," said the campaigner, who has packed city squares across Italy with his rallies.

"It is clear to everyone that this is a very delicate situation for the country," Bersani said late on Monday.

Some Democratic Party officials suggested fresh elections may have to be held within a few months after a reform of Italy's complex electoral laws. Others said some form of agreement could be found with Grillo's anti-austerity party.

Political analysts suggested a possible return to the grand coalition agreement between right and left seen under Monti over the past 18 months -- or even dissolving the Senate alone to hold fresh elections for only one chamber of parliament.

Monti said he was "satisfied" with the results and called on any future government "not to dissipate the sacrifices made by Italians.

"A government must be guaranteed for the country," he said.

The down-to-earth Bersani, the 61-year-old son of a car mechanic from northern Italy, has told Italians he is the best man to help promote a growth agenda for Europe and "turn the page" after Berlusconi.

The former communist has said he will abide by the budget discipline enforced by Monti.

But Berlusconi waged a populist campaign, blaming Germany for Italy's economic woes and promising to refund an unpopular property tax to Italians -- out of his own pocket if needed.

The 76-year-old media tycoon is a defendant in two trials -- for tax fraud and for allegedly having sex with an underage prostitute.

He is also the only post-war prime minister to have served out a full five-year term. The Milan native has been prime minister three times in a turbulent 20 years in politics.
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