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| Italian Parties Maneuver After Electoral Split | |
| (about 4 hours later) | |
| ROME — Markets plunged and Italians awoke on Tuesday to headlines screaming “Ungovernability” and “Hung Parliament” a day after national elections to replace the technocratic government of caretaker Prime Minister Mario Monti failed to produce a majority capable of governing the third-largest economy among those using the euro currency. | ROME — Markets plunged and Italians awoke on Tuesday to headlines screaming “Ungovernability” and “Hung Parliament” a day after national elections to replace the technocratic government of caretaker Prime Minister Mario Monti failed to produce a majority capable of governing the third-largest economy among those using the euro currency. |
| Former Prime Minister Silvio Berlusconi hinted that his center-right People of Liberty Party might be inclined to form a grand coalition with the center-left Democratic Party of Pier Luigi Bersani, a prospect that would be ideologically contradictory but which, experts said, might be the only governing coalition possible, given the outcome of the ballot. | Former Prime Minister Silvio Berlusconi hinted that his center-right People of Liberty Party might be inclined to form a grand coalition with the center-left Democratic Party of Pier Luigi Bersani, a prospect that would be ideologically contradictory but which, experts said, might be the only governing coalition possible, given the outcome of the ballot. |
| Results indicated that the Democratic Party would have a majority in the lower house, the Chamber of Deputies, thanks to a premium of bonus seats given to the largest bloc. But it would only have about 119 seats in the Senate, compared with 117 seats for Mr. Berlusconi’s party, far short of the 158 required to govern. | Results indicated that the Democratic Party would have a majority in the lower house, the Chamber of Deputies, thanks to a premium of bonus seats given to the largest bloc. But it would only have about 119 seats in the Senate, compared with 117 seats for Mr. Berlusconi’s party, far short of the 158 required to govern. |
| Under Italy’s electoral law, front-runners are awarded bonus seats in the lower house based on national totals and in the Senate based on regional total, which can produce split results. That happened on Monday when Mr. Berlusconi’s party won by about three percentage points in the powerful Lombardy region after it formed an alliance with the Northern League Party. | Under Italy’s electoral law, front-runners are awarded bonus seats in the lower house based on national totals and in the Senate based on regional total, which can produce split results. That happened on Monday when Mr. Berlusconi’s party won by about three percentage points in the powerful Lombardy region after it formed an alliance with the Northern League Party. |
| The outstanding success of the elections was the Five-Star Movement of comedian Beppe Grillo, which led a grass-roots and Web-based campaign and won more votes than any other party, with about 25 percent of the ballot. The group drew support from a powerful protest vote as Italians from both right and left — and the wealthier north and poorer south — were drawn to Mr. Grillo’s opposition to austerity measures and appeal to oust the existing political order. It has indicated that it is not inclined to form a governing alliance with Mr. Bersani or Mr. Berlusconi. | The outstanding success of the elections was the Five-Star Movement of comedian Beppe Grillo, which led a grass-roots and Web-based campaign and won more votes than any other party, with about 25 percent of the ballot. The group drew support from a powerful protest vote as Italians from both right and left — and the wealthier north and poorer south — were drawn to Mr. Grillo’s opposition to austerity measures and appeal to oust the existing political order. It has indicated that it is not inclined to form a governing alliance with Mr. Bersani or Mr. Berlusconi. |
| Analysts said earlier that the best-case scenario would be a shaky coalition government, which would once again expose Italy and the euro zone to turmoil if markets question its commitment to measures that have kept the budget deficit within a tolerable 3 percent of gross domestic product. News of the stalemate sent tremors through the financial world, sending the Dow Jones industrial average down more than 200 points on Monday and shaking confidence again on Tuesday, when the Italian stock market fell by some 4.5 percent. | Analysts said earlier that the best-case scenario would be a shaky coalition government, which would once again expose Italy and the euro zone to turmoil if markets question its commitment to measures that have kept the budget deficit within a tolerable 3 percent of gross domestic product. News of the stalemate sent tremors through the financial world, sending the Dow Jones industrial average down more than 200 points on Monday and shaking confidence again on Tuesday, when the Italian stock market fell by some 4.5 percent. |
| Although analysts blamed the large protest vote on Italy’s political morass and troubled electoral system, the results were also seen as a rejection of the deficit-reduction strategy set by the European Commission and the European Central Bank for a country deemed too big to fail and too big to bail out. | Although analysts blamed the large protest vote on Italy’s political morass and troubled electoral system, the results were also seen as a rejection of the deficit-reduction strategy set by the European Commission and the European Central Bank for a country deemed too big to fail and too big to bail out. |
| “No doubt Italy has an imperfect political culture, but this election, I think, is the logical consequence of pursuing policies that have dramatically worsened the economic and social picture in Italy,” said Simon Tilford, the chief economist of the Center for European Reform, a London research institute. | “No doubt Italy has an imperfect political culture, but this election, I think, is the logical consequence of pursuing policies that have dramatically worsened the economic and social picture in Italy,” said Simon Tilford, the chief economist of the Center for European Reform, a London research institute. |
| “People have been warning that if they adhere to this policy there will be a political cost, there will be backlash,” he added. “It couldn’t have taken place in a more pivotal country.” | “People have been warning that if they adhere to this policy there will be a political cost, there will be backlash,” he added. “It couldn’t have taken place in a more pivotal country.” |
| In an election marked by voter anger and low turnout, the Democratic Party had appeared late Monday to be leading in the lower house with 29.6 percent with 99 percent of the votes counted and in the Senate with one-third of the votes counted. | In an election marked by voter anger and low turnout, the Democratic Party had appeared late Monday to be leading in the lower house with 29.6 percent with 99 percent of the votes counted and in the Senate with one-third of the votes counted. |
| Mr. Berlusconi’s party led in several populous regions that carry more Senate seats, potentially giving him veto power and raising the prospect of political gridlock. | Mr. Berlusconi’s party led in several populous regions that carry more Senate seats, potentially giving him veto power and raising the prospect of political gridlock. |
| The election offered a stinging defeat for Mr. Monti, the caretaker prime minister, a newly minted politician whose lackluster civic movement appeared to win around 10 percent in both houses. “Grillo had a devastating success; the rest of the situation is very unclear,” said Stefano Folli, a political columnist for the daily business newspaper Il Sole 24 Ore. | The election offered a stinging defeat for Mr. Monti, the caretaker prime minister, a newly minted politician whose lackluster civic movement appeared to win around 10 percent in both houses. “Grillo had a devastating success; the rest of the situation is very unclear,” said Stefano Folli, a political columnist for the daily business newspaper Il Sole 24 Ore. |
| Either the Democratic Party and the People of Liberty Party “will form a grand coalition committed to reforms and changing the electoral law, which would be very difficult, or Italy will be ungovernable,” Mr. Folli added. | Either the Democratic Party and the People of Liberty Party “will form a grand coalition committed to reforms and changing the electoral law, which would be very difficult, or Italy will be ungovernable,” Mr. Folli added. |
| Mr. Monti’s government remains in place with full powers until a new government is formed. Appearing on television on Monday evening, Mr. Monti said he felt “tremendous regret” that during his tenure the political parties were not able to change Italy’s electoral law so as to guarantee more political stability. “It is a great responsibility of the political forces, and one of the reasons for the disaffection and distance from and the revindication of the political class,” he added. | Mr. Monti’s government remains in place with full powers until a new government is formed. Appearing on television on Monday evening, Mr. Monti said he felt “tremendous regret” that during his tenure the political parties were not able to change Italy’s electoral law so as to guarantee more political stability. “It is a great responsibility of the political forces, and one of the reasons for the disaffection and distance from and the revindication of the political class,” he added. |
| Under Italy’s complex electoral laws, it is extremely hard for any one party to gain a strong ruling majority needed to manage an economy with rising unemployment and a credit crunch, let alone push through structural changes to the ossified economy. Instead, the parties have resisted change to protect their own power bases. | Under Italy’s complex electoral laws, it is extremely hard for any one party to gain a strong ruling majority needed to manage an economy with rising unemployment and a credit crunch, let alone push through structural changes to the ossified economy. Instead, the parties have resisted change to protect their own power bases. |
| The results of this election would appear to represent new depths of gridlock, and few experts expected any party to form a governing coalition strong enough to prevail for long. Nicolas Véron, an economist and a senior fellow at Bruegel, a research institute based in Brussels, said that regardless of who ultimately controls the levers of government, “the key question is whether we can have serious structural reform.” | The results of this election would appear to represent new depths of gridlock, and few experts expected any party to form a governing coalition strong enough to prevail for long. Nicolas Véron, an economist and a senior fellow at Bruegel, a research institute based in Brussels, said that regardless of who ultimately controls the levers of government, “the key question is whether we can have serious structural reform.” |
| Italy “was a work in progress before the elections,” Mr. Véron added, “and I think investors understand that it will remain a work in progress for some time.” | Italy “was a work in progress before the elections,” Mr. Véron added, “and I think investors understand that it will remain a work in progress for some time.” |
| When he came to power in November 2011, after Mr. Berlusconi stepped down amid intense market turmoil, Mr. Monti was praised for restoring international confidence in Italy. Although he won plaudits from European leaders and President Obama, Italians disliked him for raising the retirement age and taxes. | When he came to power in November 2011, after Mr. Berlusconi stepped down amid intense market turmoil, Mr. Monti was praised for restoring international confidence in Italy. Although he won plaudits from European leaders and President Obama, Italians disliked him for raising the retirement age and taxes. |
| “Taxes, taxes and more taxes, that’s what voters remember the most from Monti,” said Stefano Sacchi, a professor of political science at the University of Milan. “When he stopped being a technocrat and became a politician, he came under fire for the same issues Italians blame other politicians for.” | “Taxes, taxes and more taxes, that’s what voters remember the most from Monti,” said Stefano Sacchi, a professor of political science at the University of Milan. “When he stopped being a technocrat and became a politician, he came under fire for the same issues Italians blame other politicians for.” |
| While Mr. Monti said repeatedly that if Italy managed to make its economy more competitive, taxes could eventually be lowered, his message was drowned out in the final days of a chaotic campaign by Mr. Grillo’s anti-austerity message — his party may even decide to hold a referendum on whether Italy should remain in the euro zone — as well as by Mr. Berlusconi’s antics. | While Mr. Monti said repeatedly that if Italy managed to make its economy more competitive, taxes could eventually be lowered, his message was drowned out in the final days of a chaotic campaign by Mr. Grillo’s anti-austerity message — his party may even decide to hold a referendum on whether Italy should remain in the euro zone — as well as by Mr. Berlusconi’s antics. |
Gaia Pianigiani contributed reporting from Rome, and Nicola Clark from Paris. | Gaia Pianigiani contributed reporting from Rome, and Nicola Clark from Paris. |