Italy at crossroads

February 27, 2013 - 5:04:44 am

ROME: Italy was at an impasse yesterday 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.

Bersani warned Italy was in “a very delicate situation”. Stock markets in Europe, Asia and the United States also fell on fears of instability in the eurozone’s third biggest economy as political analysts predicted either an unsteady coalition government or fresh elections within months.

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. 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. 

European capitals were quick to voice concern. “It’s a leap into the unknown, which bodes poorly both for Italy and for the rest of Europe,” Spanish Foreign Minister Jose Manuel Garcia Margallo said. 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 percent of the vote to 29.54 percent for 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 percent in the lower house.

“We’re not against the world,” Grillo told reporters yesterday. “We’ll see reform by reform, law by law. If there are proposals that are compatible with our programme, we will evaluate them,” he said.

Germany, as well as France, also reacted nervously, with German Foreign Minister Guido Westerwelle calling for a new government to be formed “as quickly as possible”. The big loser was outgoing prime minister Mario Monti, who was drafted to run a technocratic government in the debt-strapped country.

Berlusconi defied all expectations that he would suffer defeat, winning votes on a promise to refund an unpopular property tax to Italians — out of his own pocket if needed. The 76-year-old media tycoon will therefore continue to play a key role in politics and incredibly may be called on by the left to form an emergency coalition, analysts said.