FTSE 100 down as protest vote leaves hopes of stable Italian government fading

Berlusconi group may have scuppered Bersani coalition’s chances of crucial Senate majority

The prospect of a hung parliament in Italy put stock markets under heavy selling pressure this morning as an election deadlock sparked fears of more uncertainty in the eurozone.

Pierluigi Bersani’s centre-left coalition failed to secure victory in both houses of parliament last night despite being on course to poll more votes than the centre-right bloc led by Silvio Berlusconi.

The situation leaves the country facing months of political uncertainty and threatens to reignite the eurozone crisis, as the austerity programme that has pulled Europe's third-largest economy - and one of its most indebted - back from the brink is now in doubt. Financial markets initially reacted positively when exit polls suggested Mr Berlusconi's coalition was likely to trail Mr Bersani's by around 6 percentage points. But when the gap narrowed as the actual results began to filter through, Italy's borrowing costs began to rise as investors took fright at the prospect of a divided parliament.

The FTSE 100 Index was more than one per cent lower this morning, and markets in France and Germany were down by around 2 per cent.

The centre-left won the biggest share of the vote for the lower house by a margin of less than 0.5 per cent over Mr Berlusconi's right-wing coalition (29.5 to 29.1 per cent). But the tiny margin was sufficient for Mr Bersani to be assigned a majority.

He called the result on Twitter just before midnight. "The centre-left has won the lower house and is ahead in the Senate. We will manage the responsibility given to us by the 2013 election in the interests of Italy," he said. But in reality his options are limited with no majority in the Senate to pass legislation. Late last night Angelino Alfano, the secretary of Mr Berlusconi's PDL party, suggested the result in the lower house was so close that recounts might be needed.

Meanwhile, the leading daily newspaper Corriere della Sera declared that Italy was "ungovernable". Foreign investors had been hoping for stable reform-minded government in Italy to underpin the Continent's efforts to beat the sovereign debt crisis that saw Mr Berlusconi's government forced from office and replaced by a technocratic administration led by Mario Monti in late 2011.

The election was also notable for the size of the protest vote won by the anti-establishment Five Star Movement led by comedian Beppe Grillo, and the unexpectedly poor showing from Mr Monti's centrist coalition which damaged Mr Bersani's chances of forming a working majority in both houses.

Political pundit Professor James Walston, of the American University in Rome, said: "If these indications prove correct, there will be new elections in months. And in the meantime, starting tomorrow or even tonight, the markets will be going bananas."

Soon after the polling stations closed, exit polls were predicting Mr Bersani's centre-left bloc had won 32-38 per cent of the vote in the lower house of parliament. Should this result be confirmed by the count itself, Mr Bersani's group would have won a majority and be asked to form a government. Mr Berlusconi's right-wing coalition was estimated to have won between 28-32 per cent, followed by the Five Star Movement with 19-21 per cent. The exit polls suggested Mr Monti's centrist grouping had won less than 10 per cent of the vote.

In the vital race for the Senate, however, the centre-left and centre-right appeared to be neck and neck at around 30 per cent. Mr Grillo's party polled strongly in the upper house, with 25 per cent, according to exit polls.

Mr Berlusconi's stronger performance in the big, traditionally conservative regions, which carry more Senate seats, appeared to doom the centre-left's chances of majority in both houses. Crucially, without a working majority in the 315-seat upper chamber, Mr Bersani's Democratic Party would be unable to pass legislation - leaving him with a lame-duck administration. Partial results posted by the Interior Ministry suggest Mr Grillo's party would command more than 50 Senate seats.

Before the vote, Mr Grillo - who is not able to stand for parliament after he was convicted of manslaughter in 1980 when three passengers were killed in a car he was driving - vowed his movement would not do deals with mainstream parties after the election.

Putting houses in order: possible outcomes

Scenario one

The centre left, led by Pier Luigi Bersani, wins a majority in the upper and lower houses of parliament. Mr Bersani is viewed as an EU-friendly, pragmatic politician, who introduced liberalising measures in his days as Italy's Economic Development Minister in 2006 to 2008. He could be expected to continue reforms but ease back on austerity. But his party's links to the powerful left-wing public-sector union CGIL might scupper his chances of modernising Italy's rigid employment laws.

Scenario two

The centre left wins the lower house but fails to get a majority in the upper house. If this happens, Mr Bersani would be unable to pass legislation, because the Senate has equal power. So Mr Bersani would need allies to form a working government, with Mario Monti's pro-reform bloc the obvious candidate. A Bersani-Monti pact would please Brussels, Berlin and most investors. But Mr Monti's weak showing suggests he may have very few Senate seats to offer the centre left.

Scenario three

The centre left wins the lower house but fails to form a coalition needed to pass legislation through the Senate. Last night, this outcome was looking increasingly likely as the Democratic Party failed to make inroads to the "swing-state" regions of Lombardy, Veneto and Campania. Such a lame-duck administration might limp on for a few months but fresh elections would be virtually certain - and financial instability in Italy and beyond, a very real danger.

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Customer Services Representative

£15500 - £17000 per annum: Recruitment Genius: This international company deve...

Recruitment Genius: Field Service Engineer - Basingstoke / Reading Area

£16000 - £27000 per annum: Recruitment Genius: This established name in IT Ser...

Recruitment Genius: Transportation Contracting Manager

£33000 - £38000 per annum: Recruitment Genius: A global player and world leade...

Recruitment Genius: Experienced PPC Search Marketing Executive

£19000 - £25000 per annum: Recruitment Genius: A fantastic opportunity has ari...

Day In a Page

How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map
Lionel, Patti, Burt and The Who rock Glasto

Lionel, Patti, Burt and The Who rock Glasto

This was the year of 24-carat Golden Oldies
Paris Fashion Week

Paris Fashion Week

Thom Browne's scarecrows offer a rare beacon in commercial offerings
A year of the caliphate:

Isis, a year of the caliphate

Who can defeat the so-called 'Islamic State' – and how?
Marks and Spencer: Can a new team of designers put the spark back into the high-street brand?

Marks and Spencer

Can a new team of designers put the spark back into the high-street brand?
'We haven't invaded France': Italy's Prime Minister 'reclaims' Europe's highest peak

'We haven't invaded France'

Italy's Prime Minister 'reclaims' Europe's highest peak
Isis in Kobani: Why we ignore the worst of the massacres

Why do we ignore the worst of the massacres?

The West’s determination not to offend its Sunni allies helps Isis and puts us all at risk, says Patrick Cockburn
7/7 bombings 10 years on: Four emergency workers who saved lives recall the shocking day that 52 people were killed

Remembering 7/7 ten years on

Four emergency workers recall their memories of that day – and reveal how it's affected them ever since
Humans: Are the scientists developing robots in danger of replicating the hit Channel 4 drama?

They’re here to help

We want robots to do our drudge work, and to look enough like us for comfort. But are the scientists developing artificial intelligence in danger of replicating the TV drama Humans?
Time to lay these myths about the Deep South to rest

Time to lay these myths about the Deep South to rest

'Heritage' is a loaded word in the Dixie, but the Charleston killings show how dangerous it is to cling to a deadly past, says Rupert Cornwell
What exactly does 'one' mean? Court of Appeal passes judgement on thorny mathematical issue

What exactly does 'one' mean?

Court of Appeal passes judgement on thorny mathematical issue