Markets Dive Amid Italian Election Stalemate
World markets have been rocked after elections in Italy seen as crucial for the eurozone ended in deadlock.
No group emerged as a clear winner after the vote, which saw a populist anti-austerity party make a stunning debut.
The Italian stock market in Milan fell 5% on opening and state borrowing costs rose as investors took fright at the political stalemate.
At the close of trading on Tuesday the FTSE 100 was down 1.34%, Italy's MIB 4.89% lower, Spain's Ibex off 3.2%, Germany's Dax down 2.27% and France's Cac reduced by 2.67%.
Banking stocks were particularly badly hit with the Royal Bank of Scotland and Barclays the biggest fallers on the FTSE 100, losing more than 4% of value.
The euro also fell to an almost seven-week low against the dollar in Asia on fears about the eurozone debt crisis, down as far as $1.3042, its lowest since January 10.
While other European stock markets, including the FTSE 100 in London, saw falls greater than 1% the Dow Jones opened positively on Wall Street following a 1.6% loss on Monday.
The market reaction reflects concerns that the election result could spark a new crisis in Italy, which has the eurozone's third largest economy.
There are fears it will jeopardise tough reforms required to heal its economic woes and prevent a new round of global financial turmoil.
The centre-left block of Pier Luigi Bersani will have a majority in the lower house thanks to a premium of seats given to the largest block in the chamber.
In the upper house, the Senate, seats are awarded on a region-by-region basis. Here, the centre-left looks set to end up with around 119, compared to 117 for the centre-right but 158 are needed for a majority to govern.
Any coalition government that may be formed must have a working majority in both houses to pass legislation, which means Italy is now in a state of limbo with a hung parliament that is unprecedented in its post-war history.
"It is clear to everyone that this is a very delicate situation for the country," Mr Luigi Bersani said.
Former prime minister Silvio Berlusconi has already indicated his centre-right could be open to a grand coalition with the centre-left under Mr Bersani but he wants a recount for the Senate vote.
"Italy cannot be left ungoverned, we have to reflect," he said, describing the market reaction as "a bity crazy" and saying all sides had to "sacrifice something" if the impasse was to be broken.
An ally of conservative German Chancellor Angela Merkel urged Italy to stick with reforms pursued by the outgoing technocratic emergency government of Mario Monti.
But the poor showing by Mr Monti's centrist bloc, which took just 10.6%, showed a weariness with austerity that was exploited by both Mr Berlusconi and comic Beppe Grillo.
The latter's anti-establishment 5-Star Movement won more votes than any other party, taking 25% nationally.
In just three years, the 5-Star Movement - heavily backed by a frustrated generation of young Italians increasingly shut out from permanent full-time jobs - has grown from a marginal group to one of the most talked about political forces in Europe.
Comparing single parties without coalitions, it is now the biggest party in the lower house with 25.55% to the Democratic Party's 25.41% - a shock success that analysts predicted would reverberate around an austerity-weary Europe.
"The 'non-party' has become the largest party in the country," said Massimo Giannini, commentator for the Rome newspaper La Repubblica about Grillo, who mixes fierce attacks on corruption with policies ranging from clean energy to free Internet.
"This is fantastic! We will be an extraordinary force!" Mr Grillo said on his website, warning mainstream politicians they would "only last a few more months".
"We'll have 110 people in parliament and we'll be millions outside."
Mr Monti said: "It's not that surprising if you consider how much people were let down by politics in its traditional forms."
Some Democratic Party officials suggested fresh elections may have to be held within a few months after a reform of Italy's complex electoral laws. Others said some form of agreement could be found with the anti-austerity 5-Star Movement.
Political analysts suggested a possible return to the grand coalition agreement between right and left seen over the past 18 months, or even dissolving the Senate alone to hold fresh elections for only one chamber of parliament.
what do you think?
Well done to Beppe Grillo for replacing 110 self-serving gobsmiths with normal human beings, we need a Beppe here.
In many ways, I agree with you John. However, Signor Grillo is a comedian by profession and there are surely enough of them already in our parliament?? Of course it could be argued Italy already had one in Berlusconi.............
John. This is precisely what we need here to give the 2 big parties a good kicking. For too long they have believed they are automatic choices to replace unpopular govts. Labour mess up the Tories win, Tories mess up Labour win but in reality nothing changes
But Dave - things do change. There is no comparison to our quality of life and our affluence and well being compared to just 50 years ago. Two party democracy does mean that change can be ''slow'' as consensus is required but better that than a one party state where Áhange is never challenged or even debated. However, a popular movement similar to the M5S would not be a bad thing.
Peter. No way do I advocate a one party state but I would like a bit more choice than the two main parties we have today. As Geo Galloway says they are merely 2 cheeks of the same rs
More like a three cheeked backside, Dave.
" Italy had one dictator after another but produced Leonardo, Michael Angelo and a host of others. Switzerland has a thousand years of democracy and what have they got to show for it ? the cuckoo clock "
They have the large hadron collider at CERN which is based in Geneva
Chris. Yes, another massive waste of money conducting experiments which no one other than those running the boys toy are interested in
Don't forget Toblerone
The efficiency of photovolatic(solar panels ) has been increased due to research at cern. To the point that geneva hospital uses the panels to generate a heck of a lot of its own electricity. Also the medpix chip was designed at cern so that lower levels of radioactive isotopes can be used to gain more detailed images during medical examinations. These 'wastes' of money that no one is interested in benefit everyone in the long term.
Chris. As i said only those with an interest in it give two hoots
So davenlesey, by that token photosynthesis is obsolete as I'm not interested in it. Oops! No air.
I dont really care whether you are interested or not. I was just proving that the experiments carried out at cern are not as you pointed out "a waste of money" and actually benefit people in the long run.
Steven. That is old hat Plants have been doing it since time imemorial without the help of a hadron collider
Chrtis. Ok so there have been some benefits from the experiments but at what cost. Only when the benefits are balanced against the costs will we see whether or not it is value for money
How does this affect the footsie an prob us i dnt get it
Nothing for the EU to worry about. They can fall back on the tried and tested remedy of holding elections until the idiot voters come up with the result they EU wanted. It worked in Ireland & Greece.Officials are already doing the ground work by suggesting that fresh elections may have to be held within a few months
But by your methodology all you need to do to get rid of the European economic crisis is to ignore it therefore rendering it not "too hoots worthy". At least try to maintain a stance.
Dave, it's not the EU that is calling for a re-election in Italy it is the bicameral system in Italy that means that no one party can pass law without having a majority in both the Chamber and the Senate. The Italians are saying there may have to be another election (read the article above) unless a coalition can be formed. Much as you would like to diss the EU this is not an instance when you can.
Steven.Your warped logic is not even worth a reply
Peter. Wasn't the guy who has just been turfed out not installed as an EU stooge to do their bidding?
Dave - you need to get the basic facts correct (and not offer your prejudice as truth) On 9 November 2011, Monti was appointed a Lifetime Senator by Italian President Giorgio Napolitano. On 12 November 2011, following Berlusconi's resignation, Napolitano invited Monti to form a new government. Monti accepted the offer, and held talks with the leaders of the main Italian political parties, declaring that he wanted to form a government that would remain in office until the next scheduled general elections in 2013. Which is what happened. Nothing to do with the EU.
Peter. You will be telling me next that all the bailouts that Greece, Portugal, Spain & Ireland received from the EU were all given without any strings attached whatsoever. I don't believe it. The strings are still attached and Brussels pull them every so often when the beneficiaries of these loans are not doing what they are told.
Italian economist Mario Monti spent 9 years as an EU commissioner and was appointed as PM of Italy NOT elected. But the EU had nothing whatsoever to do with it. Pull the other one
Last night I watched a Dan Snow programme about Paris and the lead up to the French revolution.The people were heavily taxed,had to live in sqalour and didn't have enough food-- all to fund the lavish lifestyle of those in charge.Looks like the polticos have forgotten history and are about to make the same mistakes throughout Europe
Bring on the tumbrils Bob, I've got my knitting needles ready.
lol John, sadly British Leyland have gone so no tumbrils left and we can't use Citroen/Peugeot/Renault as they won't have tyres soon.
Well done the Italian voters starting to break the one party state ruled by Bankers now go for the throat and encourage the rest of the voters to join you .Italy then can go it alone telling the E.U/Bankers to whistle for their over priced loans .
Its time the super elite and the super wealthy in this world to fully pay for the costs of the poverty stricken. The drip down method does not work. No one person should have billions when billions dont have anything.
the eu and the euro are dead.this is what we need to do over here.vote ukip and get the rest out and have some one fresh in.liboure cons, libs, are all corrupt and spineless when it comes to looking after the british people.
what country has held more elections than any other since the 1940s? and they still don,t get it right, but neither do we i suppose. The one thing that we learn is that we don.t learn from our mistakes, we just keep on having them
It is usual for an Italian government to last just a few months and to have hung parliaments - what bothers me is that we seem to have the same thing here witha minority party, the LibDems, dictating policy.
David. Thats the problem with politicians in a coalition.They see the prime directive as remaining in power and not doing what is right for the country. I initially saw the coalition govt as a good thing in that the extremes of both sides would be tempered by the other but it hasn't worked out that way