- 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.

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.

“The first is the big surprising increase scored by the 5 Star Movement, and the other is the disappointing result” of Mr. Monti’s coalition, said Massimo Franco, a columnist with Corriere della Sera.

Turnout was 75 percent, down nearly 6 percentage points from the rate in the last national election in 2008. Experts say a low turnout will hurt the mainstream parties. Usually around 80 percent of the 50 million eligible voters go to the polls.

Under Italy‘s complex electoral law, how the upper chamber’s seats are divvied up depends on how the candidates do in Italy‘s regions, since the more populous regions, such as Lombardy, get a greater share of the seats.

Whether the center-left takes Lombardy might well decide if the coalition could stitch together a coalition with a workable majority in the Senate, as well as in the lower Chamber of Deputies, where the regional factor doesn’t exist.

Mr. Berlusconi, who was forced from office in November 2011 by the debt crisis, has sought to close the gap by promising to reimburse an unpopular tax — a tactic that brought him within a hair’s breadth of winning the 2006 election.

Mr. Monti, respected abroad for his measures that helped stave off Italy‘s debt crisis, has widely been blamed for financial suffering caused by austerity cuts.

Mr. Grillo’s forces are the greatest unknown. His protest movement against the entrenched political class has gained in strength following a series of corporate scandals that only seemed to confirm the worst about Italy‘s establishment. If his self-styled political “tsunami” sweeps into parliament with a big chunk of seats, Italy could be in store for a prolonged period of political confusion that would spook the markets. He himself won’t hold any office because of a manslaughter conviction

Most analysts believe Mr. Bersani would seek an alliance with center-right Mr. Monti to secure a stable government, assuming parties gathered under Mr. Monti’s centrist banner gain enough votes.

While left-leaning Mr. Bersani has found much in common with Mr. Monti, a large part of his party’s base is considerably further to the left and could rebel.

• Colleen Barry reported from Milan.

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