- Associated Press - Monday, February 25, 2013

ROME (AP) — Italy‘s crucial elections appeared to be heading toward gridlock, initial results showed Monday, with the center-left forces of Pier Luigi Bersani moving ahead in the lower house of parliament and the camp of former premier Silvio Berlusconi gaining the upper hand in the equally powerful Senate.

The upstart protest campaign of comic-turned-politician Beppe Grillo also was showing a stunningly strong result in both houses of the legislature, confirming its surprise role as a force in Italian politics.

The unfolding murky result raised the possibility of new elections in the coming months and bodes badly for the nation’s efforts to pass the tough reforms it needs to snuff out its economic crisis. After surging in the wake of exit polls, Milan’s main stock index slumped with first projections before closing up slightly.

SEE ALSO: Italians vote in elections seen as key to finance crisis

The Italian election has been one of the most fluid in the past two decades thanks to the emergence of Grillo’s 5 Star Movement, which has capitalized on a wave of voter disgust with the ruling political class and harsh austerity measures imposed by technocrat Premier Mario Monti, who has fared miserably in the elections.

The decisions Italy‘s government makes over the next several months promise to have a deep impact on whether Europe can decisively stem its financial crisis. As the eurozone’s third-largest economy, its problems can rattle market confidence in the whole bloc, and analysts have worried it could fall back into old spending habits.

Mr. Bersani’s coalition — which has shown a pragmatic streak in supporting the tough economic reforms spearheaded by Mr. Monti — was leading in the lower house of Parliament, according to exit polls.

Mr. Bersani’s coalition has taken 35.5 percent of the vote for the lower house of parliament, ahead of the center-right coalition under Mr. Berlusconi with 29 percent, the polls indicated. The poll by Tecne has a margin of error of plus or minus 2.5 percentage points.

In the Senate, projections by the Piepoli Institute for RAI public TV showed Mr. Berlusconi’s coalition slightly ahead with 31 percent to Mr. Bersani’s 30 percent. Mr. Grillo’s movement had 24.6 percent, and Mr. Monti’s centrist forces 9.4 percent. Sky’s Senate projections showed Mr. Berlusconi with a 2-point lead over Mr. Bersani, and Mr. Grillo with 25 percent.

Mr. Bersani’s party would have to win both houses to form a stable government, and given the uncertainty of possible alliances, a clear picture of prospects for a new Italian government could take days. It is all but impossible that Mr. Bersani would team up in a “grand coalition” with his arch-enemy, Mr. Berlusconi.

Italy‘s borrowing costs have reflected the optimism that the country will stick to its reform plans.

The interest rate on Italy‘s 10-year bonds, an indicator of investor confidence in a country’s ability to manage its debt, fell to 4.19 percent in afternoon trading Monday. Last summer, at the height of concern over Italy‘s economy, that interest rate was hovering at about 6.36 percent.

Milan’s stock exchange closed slightly higher, with the benchmark FTSE MIB up 0.73 percent to 16,351 points.

Mr. Bersani, a former communist, has reform credential as the architect of a series of liberalization measures and has shown a willingness to join with Mr. Monti, if necessary, to form a stable government. But he could be hamstrung by the more left-wing of his party. And Mr. Grillo’s stunning surge shows Italians are fed up with painful economic cures.

Mr. Monti’s centrist coalition was having a terrible election, with 9.5 percent in the lower house, according to Tecne’s exit polls.

Analysts saw two big stories in Italy‘s election.

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