Markets nervous as Italy wakes up to a hung Parliament

Posted on 26 Feb 2013

The left-wing coalition led by Pier Luigi Bersani has failed to convince Italians, who woke up this morning to a hung Parliament and the promise of a chaotic few months ahead as investors' concerns grow.

Despite having trailed the Partito Democratico by as much as 15% for months, former Prime Minister and media tycoon Silvio Berlusconi has proven – yet again – to be capable of winning the hearts and minds of millions of Italians.

Mr Bersani and his allies have only three seats more than Mr Berlusconi’s coalition in Italy’s Senate, which essentially means that the country is ingovernabile, ungovernable. Their coalitions respectively obtained 31.6% and 30.7% of the votes.

Outgoing Prime Minister (and – it is rumoured – EU favourite) Mario Monti didn’t even reach 10% of the votes.

The real winner in this election is comedian and activist Beppe Grillo’s Five Star Movement, a group of citizens that in three years went from being a rather small internet-based community to Italy’s first political entity. The grillini, who will enter Parliament for the first time after having successfully accessed local governments in the past year, gained 24% of the votes (by comparison, Berlusconi’s PdL – the largest party in the coalition the scandal-prone tycoon leads – only had 22.3% in the Senate).

Mr Grillo managed to capture Italy’s dissatisfaction with traditional politics and establishment, fuelled by endemic corruption, a stalling job market and a number of recent scandals (including oil and gas giant ENI’s and Finmeccanica’s).

The results of this election clearly present Italy with a huge challenge – will Mr Bersani find a way to coalesce with Mr Monti to form a stable government? Some experts even predict Mr Bersani will have to find a way to form a coalition with Mr Berlusconi, as unlikely and impossible as that sounds.

The Five Star Movement has made it very clear that it won’t take part in any coalition, but decide what laws and measures to support depending on whether they are in line with its programme or not.

The European Union and the financial markets have already showed concerns over the instability that Italy is likely to face, which is expected to add to the country’s woes as investors’ confidence in the country erodes even further.

This morning, the Italy-Bund spread was going up, while the stock market in Milan lost 4%. German chancellor Angela Merkel said, through a spokesman, that the EU cannot afford a “Greece-like scenario” and that a stable government in Italy is critical to the European Union.


Photo courtesy of Nathan Guy