Italy risks political impasse in cliffhanger election

ROME (AFP) - Italy was headed for an impasse with the centre-left barely ahead against Silvio Berlusconi in parliamentary elections being watched around Europe in which the real winner might be a new protest party led by a former comedian.

Democratic Party leader Pier Luigi Bersani and his leftist coalition were shown less than one percentage point ahead in incomplete results from voting for the lower house, the Chamber of Deputies.

And in the Senate, Mr Bersani was seen just one per cent ahead but projections based on early results showed Berlusconi's centre-right coalition would win the most seat with between 113 and 123 seats, although without an overall majority.

Bersani under these projections for the Senate is slated to win between 104 and 105 seats. Even if he allies with outgoing premier Mario Monti's centrist coalition it would also fall short of a majority, leading to an impasse.

"If there is one majority in the Chamber and another in the Senate, there is no government," said Mr Stefano Fassina, a top Democratic Party official in charge of economic and social affairs.

Nervous-looking Democratic Party candidates suggested that fresh elections may have to be held within a few months after a reform of Italy's maddeningly complex electoral laws, although they cautioned to wait until definitive results.

"This is a shock vote that gives us a blocked parliament," ran a headline on the website of Italy's top-selling daily, Corriere della Sera.

Massimo Razzi, columnist for La Repubblica daily, said the elections had made Italy "ungovernable".

Analysts warn an alliance between Mr Bersani and Mr Monti - even if it could form a majority - could be unsteady because of huge differences between the free-marketeer Mr Monti and radical leftists already allied with Mr Bersani.

The newcomer Five Star Movement led by former comedian turned activist Beppe Grillo, who has stirred anger at politicians and budget cuts, looked set to be the real winner of the vote, bringing in dozens of lawmakers to parliament.

"This is fantastic! We will be an extraordinary force," Mr Grillo said in a phone interview on his movement's website, 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.

Mr Grillo's movement is calling for a referendum on the euro and a 20-hour working week, as well as a raft of environmental and social rights demands.

In contrast to Mr Grillo's stunning success, outgoing prime minister Mario Monti was given just 10 per cent in exit polls.

Mr Monti has won praise in Europe for his 18 months in government but has been increasingly criticised at home for his austerity.

Mr Angelino Alfano, national secretary of Berlusconi's People of Freedom party, said the result was "extraordinary".

"We are very happy, very satisfied," he said.

"I think these elections show that people who thought... Silvio Berlusconi was finished should think again," he said.

European capitals and the financial markets had been worried that no clear winner will emerge, bringing fresh instability to the eurozone's third largest economy after Germany and France.

"A stalemate between the two houses of parliament would add a noisy element of instability to the political mix," Berenberg bank analysts said in a note to investors.

Italy has been plagued by a chronically unstable political landscape for decades, and there have been fears too of a return to lax public finances.

Investors hailed the first signs that the left had won handily, with stocks in Milan jumping by more than 3.5 per cent after the exit polls.

The rally slowed however and stocks went into negative territory after it became clear that the race might be too close to call in the Senate.

Stocks finally closed up just 0.73 per cent.

The differential between Italian and German 10-year government bonds rose to 293 basis points on Monday from about 255 points before polls closed, indicating market jitters.

A lacklustre turnout compared with previous votes also reflected widespread frustration among voters fed up with austerity cuts and grinding recession.

Turnout was 75.17 per cent - five percentage points lower than in 2008.

Mr Bersani, 61, says he is the best man to 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 Mr Monti, a former Eurocrat roped in after Berlusconi's ouster at the height of Europe's financial crisis in 2011.

But Mr Bersani would face pressure from trade unions and many ordinary Italians who have seen unemployment rise to record highs.

The down-to-earth Mr Bersani, the son of a car mechanic, has tried to overcome his image as a party apparatchik and has surrounded himself with a youthful team with many women in the ranks.

Mr Bersani's arch-rival Berlusconi has 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, who was mobbed by three topless feminists in a protest as he cast his ballot on Sunday, 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 term of five years. The Milan native has been prime minister three times in 20 years.

"We're living a tragi-comic moment, with lots of fantastical promises, and I don't think whoever wins will have a stable majority," said Mr Luciano Pallagroni, 77, as he voted in Rome.