ITALY-VOTE-PLACARDS

This week’s general election has produced the country’s first-ever hung parliament, and the news wreaked havoc on world markets as fears rose of a new Eurozone crisis taking hold. Ryan McCarthy sets the scene:

This has been an election which featured an ex-prime minister who’s about to face trial for allegedly having sex with an underage night-club dancer and who was sentenced to four years in prison for tax evasion; a comedian running on an “antisystem” message; and Mario Monti, the country’s current prime minister, whose campaign a rival compared to a coma, and whose alliance is set to finish in fourth place.

As one Italian newspaper put it this morning: “The winner is: Ingovernability”. Barbie Latza Nadeau explains:

Pier Luigi Bersani’s [four-party] center-left coalition narrowly won in the lower house of parliament and will benefit by an automatic winner’s bonus of 54 percent of the house seats, but he barely eked out a win in the Italian senate, where it counts. There, the divisions are based on regions, and his win does not translate to a majority. His chief nemesis, Silvio Berlusconi, who rose from the ashes of a scandalous resignation in November 2011, was able to steer his center-right coalition to within a hair of the majority, but with no willing partners to help him reach the threshold.

Meanwhile, the anti-establishment “5-Star Movement” organized by comedian and blogger Beppe Grillo grabbed 25% of the vote in Italy’s lower house – more than any other party – as well as 23% of the vote in the country’s Senate. Grillo and his supporters have now earned an apparent kingmaker role for which, as Gavin Hewitt notes, they appear to want no part:

Mr Grillo has tapped into a mood of anger and resentment. He never gave a single interview to Italian TV and yet has nearly 170 seats. The country is in deep recession. Unemployment is rising and industrial production is at its lowest level since the 1990s. Mr Grillo raged against corruption, against budget cuts, against austerity and promised to hold a referendum on continued membership of the euro. He promised “a tsunami” and he delivered. His MPs are young, unproven and without political experience. … One unanswered question is whether Beppe Grillo will be open to a deal. Would his movement support, say, a centre-left coalition in exchange for widespread reforms of the political system? We don’t know. Buoyed up by success he has only promised to clear out the political class.

In fact, Grillo has has maintained his party would not join any coalition, though it would consider proposals on a “law by law, reform by reform” basis. For his part, Silvio Berlusconi has floated the idea of a grand coalition between his center-right coalition and the center-left. Douglas J. Elliot sees that as the most-likely possible solution to the gridlock, though not without its risks:

It would be unstable despite holding a clear majority of seats in both houses, because the views and interests of Berlusconi and the Center-Left only partially overlap. Further, the Democratic Party is fairly committed to continuing on the economic path agreed with its European partners, while Berlusconi campaigned on the idea of rejecting that path. Finding a set of policies that both groups could support and that would not trigger a rupture with Germany and Brussels, spooking the markets, will be difficult.

Joe Weisenthal points to austerity as the primary motivator in the election:

Voters hate austerity. And voters hate when their own politicians are taking their cues from an institution like the European Central Bank, rather than basing decisions on domestic needs. And that’s the phenomenon that came home to roost last night. The political parties seen as continuing along the existing ECB-preferred path did badly. The rebellion voters (Silvio Berlusconi and populist Beppe Grillo) did much better than expected. And this has the potential to undermine all of the progress made in Europe over the past several months.

Indeed 57% of the Italian electorate voted for anti-austerity parties. Nigel Cassidy indicates this sentiment could signal problems for other austerity-besieged countries like Ireland and Portugal. And he sees little hope for Italy:

As things stand, Italy’s economy is still shrinking and its debt is forecast to rise to 128% of GDP by the end of this year. Both the Silvio Berlusconi and Beppe Grillo political camps opposed some of the tax hikes and public spending cuts instituted by Mr Monti. Yet, even if some of these cuts were reversed, it seems doubtful that an economy that has hardly grown in two decades could be turned around anytime soon. Reversing the most recent reforms would also signal that the new government was unwilling or unable to deal with fundamental economic problems. This in itself could lead to spiralling bond yields and the flight of capital invested in Italy could resume. The Five Star Party’s avowed opposition to eurozone fiscal convergence might also slow future progress on banking union and other financial reforms.

(Photo: Ripped off electoral placards showing the Democratic Party (PD) logo and right-wing Silvio Berlusconi (L) are displayed on a wall in Rome on February 26, 2013. By Filippo Monteforte/AFP/Getty Images)