Protest votes raise uncertainty in close Italy election

ROME Mon Feb 25, 2013 1:41pm IST

A woman casts her vote in a polling station in Rome February 24, 2013. REUTERS/Yara Nardi

A woman casts her vote in a polling station in Rome February 24, 2013.

Credit: Reuters/Yara Nardi

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ROME (Reuters) - Polls in Italy opened for the second and final day of voting on Monday, with a surge in protest votes increasing fears of an unclear outcome that could hamper economic reforms.

"I'm sick of the scandals and the stealing," said Paolo Gentile, a 49-year-old lawyer from Rome who said he had voted for the 5-Star Movement, an anti-establishment group set to make a huge impact at this, its first general election.

"We need some young, new people in parliament, not the old parties that are totally discredited."

Opinion polls give the centre-left coalition led by former Industry Minister Pier Luigi Bersani a narrow lead but the race has been thrown open by the prospect of a huge protest vote - most of it going to 5-Star - against austerity and a wave of corporate and political scandals.

A bitter campaign, fought largely over economic issues, has been closely watched by financial markets, still wary after the debt crisis that took the whole euro zone close to disaster and brought technocrat prime minister Mario Monti to office in 2011.

For the euro zone, the stakes are high. Italy is the third largest economy in the 17-member bloc and the prospect of political stalemate could reawaken the threat of dangerous market instability.

"There are similarities between the Italian elections and last year's ones in Greece, in that pro-euro parties are losing ground in favour of populist forces," said Mizuho chief economist Riccardo Barbieri.

"An angry and confused public opinion does not see the benefits of fiscal austerity and does not trust established political parties."

Voting ends at 3 p.m. (1400 GMT), with the first exit polls due shortly afterwards. Projections based on the vote count will be issued through the afternoon and the final result should be known late on Monday or early Tuesday.

Italian bond markets remained sanguine on Monday morning, quickly reversing modest early losses. Later on Monday Italy will offer 4.25 billion euros of bonds in a further test of market sentiment.

The result is likely to be the most fragmented in decades, with the old left-right division disrupted by the rise of 5-Star, led by comic Beppe Grillo, and by the decision by Monti to run at the head of a centrist bloc.

"It will be a vote of protest, maybe of revolt," said Corriere della Sera, Italy's largest newspaper, on Monday.

It is unclear how Grillo's rise will influence the result, with some pollsters saying it increases the chances of a clear win for the centre-left, led by Bersani's Democratic Party (PD), because 5-Star is taking votes mainly from Berlusconi.

After the first day of voting on Sunday about 54 percent of voters had cast their ballots, a sharp fall on the level of 62.5 percent seen at the same stage in the last election in 2008.

Bad weather hampered the turnout in Italy's first post-war election to be held in winter.

The 5-Star Movement, backed by a frustrated younger generation increasingly shut out of full-time jobs, could challenge former premier Silvio Berlusconi's People of Freedom (PDL) party as Italy's second largest political force.

"Come on, it isn't over yet," was Monday's front page headline in Il Giornale daily, owned by Berlusconi's brother, a call to arms to voters not to give up.

The 76 year-old Berlusconi has pledged sweeping tax cuts and echoed Grillo's attacks on Monti, Germany and the euro in a media blitz that has halved the lead of the centre-left since the start of the year.

Support for Monti's centrist coalition meanwhile has faded and he appears set to trail well behind the main parties.

SENATE RACE

Monti helped save Italy from a mounting debt crisis when he replaced a discredited Berlusconi in November 2011, but with the economy in its longest recession for 20 years analysts fear an electoral stalemate could spark renewed market pressure.

"I voted for the PD because a PD win is the only way to have a stable government and we need stability or we will end up like Greece," said Viola Rossi, an 80 year-old pensioner from Rome.

Whatever government emerges will inherit an economy that has been largely stagnant for much of the past two decades and problems ranging from record youth unemployment to a dysfunctional justice system and a bloated public sector.

The credibility of the political system has been hit by corruption scandals and criminal investigations affecting state-controlled defence group Finmeccanica and Italy's third-largest bank Monte dei Paschi di Siena.

If Bersani wins, it is far from clear that he will be able to control both houses of parliament and form a stable government capable of lasting a full five-year term.

Italy's electoral laws guarantee a strong majority in the lower house to the party or coalition that wins the biggest share of the overall national vote.

However the Senate, elected on a region-by-region basis, is more complicated and the result could turn on a handful of regions where results are too close to call, including Lombardy in the rich industrial north and the southern island of Sicily.

Many politicians and analysts believe Bersani and Monti will end up in an alliance after the vote, despite a number of spiky exchanges during the campaign and Monti's insistence that he will not join forces with Bersani's leftist allies.

For his part, Bersani, who has pledged to maintain the broad reform course set by Monti while doing more to help growth, says he would seek support from other parties and would be ready to offer the former European commissioner a job in his government.

(Additional reporting by Stefano Bernabei and Gavin Jones; Editing by Robin Pomeroy)

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