Belfast Telegraph

Wednesday 17 September 2014

Parties struggle to form government

Democratic Party leader Pierluigi Bersani has ruled out an alliance with Silvio Berlusconi after inconclusive Italian elections

A centre-left group of parties appears to have the best chance at forming a coalition government in Italy after an inconclusive national election, but the challenge is steep and comes amid public anger over austerity measures.

If Italian parties fail to form a governing coalition, new elections would be required, causing more uncertainty and a leadership vacuum, and that possibility has rattled financial markets across Europe.

Pier Luigi Bersani and his centre-left allies appears to have won a narrow victory in the lower house of parliament, while the Senate looks split with no party in control. Silvio Berlusconi, the former Italian premier whose centre-right coalition did better than expected, is a key player since his coalition is now the second-biggest bloc in the upper chamber.

Comic-turned-political leader Beppe Grillo, whose 5 Star Movement capitalised on a wave of voter disgust with the ruling political class, had a surprisingly strong showing. His bloc of seats in parliament could prove crucial in making any coalition government viable.

The two-day election on Sunday and Monday was also a clear rejection of the previous technocratic government led by Mario Monti. That government enacted wide-ranging reforms to the budget and the economy. Though its borrowing rates have fallen in financial markets, the cost to Italians has been high, with Italy mired in recession and unemployment on the rise.

Mr Berlusconi has already ruled out an alliance with Mr Monti, his predecessor, whom he blamed for driving Italy deeper into recession.

A few seats in Parliament based on Italians' voting abroad still remain to be decided, but their numbers will not ease the gridlock. European leaders pleaded with politicians in Italy to quickly form a government to continue to enact reforms to lower Italy's critically high debt and spare Europe another spike in its four-year financial crisis.

Mr Bersani said he was not opening talks with any potential partners until he submits his programme to Italy's president, who taps a candidate to form a government.

Stinging from a loss of some four million votes compared to the last election in 2008, Mr Bersani has not yet identified who he could try to form alliances with. But top officials in his Democratic Left (PD) party were quick to rule out any deal with Mr Berlusconi. "As far as I go, absolutely not," Stefano Fassina, a PD official, said of a possible Bersani-Berlusconi alliance.

Italy's FTSE MIB index closed trading on Tuesday 4.89% lower at 15,731, having earlier been nearly 5% down. Some of its banking stocks were briefly suspended after precipitous falls at the bell. Whether the negative market reaction extends further into the week may hinge on how quickly a solution is reached in Italy.

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