26 Feb 2013

Stalemate in Italy as voters turn against austerity

Political deadlock in the Italian elections reignites fears over the eurozone crisis, as a hung parliament beckons and markets react with an immediate rise in borrowing costs for the country.

Deadlock in the Italian elections leads to an immediate rise in the borrowing costs of the eurozone's third biggest economy as a hung parliament beckons (Getty)

The bond markets reacted against Italian voters’ failure to elect a majority government to replace Mario Monti‘s technocratic administration.

The result was a reaction against the austerity measures pursued by Mr Monti, who came fourth with just 10 per cent of the vote.

In contrast, the anti-austerity Five Star Movement, headed by comic Beppe Grillo (pictured here), picked up 25.5 per cent of the vote – a better showing than that achieved by any other single party in Italy’s lower house.

Pier Luigi Bersani’s centre-left bloc won 29.5 per cent of the vote in the lower house, just ahead of Silvio Berlusconi‘s centre-right bloc, which won 29.2 per cent.

Forced out

While Mr Berlusconi, who was forced out of office in 2011 amid allegations of sex with an underage prostitute, is placed to take more seats than Mr Bersani in the upper house, he is unlikely to win a majority.

French Finance Minister Pierre Moscovici said Mr Monti “carried out policies that seemed hard to the Italians and he did not get their full vote”.

He added: “What I hope is that Mr Bersani will be able to form a government , a government that can be for us a friendly counterpart and which is committed to European construction.”

German Economy Minister Philipp Roesler said heavily indebted Italy – the eurozone’s third biggest economy – had to continue the austerity measures pursued by Mr Monti’s government.

“There is no alternative to the structural reforms that are already under way and which include consolidating the budget and boosting competitiveness,” he said.

The indecisive result, which could lead to new elections, has implications for Europe’s ability to withstand the financial crisis it has been battling against in recent years.

Ireland, Portugal, Greece and Spain have received bailouts to help them through the crisis, but Italy is considered too big to help in the same way.