Italy Faces Political Gridlock After Elections

ROME (AP) -- The prospect of political paralysis hung over Italy on Monday as partial official results in crucial elections showed an upstart protest campaign led by a comedian making stunning inroads, and mainstream forces of center-left and center-right wrestling for control of Parliament's two houses.

The story of the election in the eurozone's third-largest economy was shaping up to be the astonishing vote haul of comic-turned-politician Beppe Grillo, whose 5 Star Movement has capitalized on a wave of voter disgust with the ruling political class.

Another surprise has been the return as a political force of billionaire media mogul Silvio Berlusconi, who was forced from the premiership at the end of 2011 by Italy's debt crisis, and whose forces now had a strong chance of capturing the Italian Senate. His main rival, the center-left Pier Luigi Bersani, appeared headed toward victory in Parliament's lower house.

The unfolding murky result raises the possibility of new elections in the coming months and bodes badly for the nation's efforts to pass the tough reforms it needs to snuff out its economic crisis. After surging in the wake of exit polls, Milan's main stock index slumped with first projections before closing up slightly.

The Italian election has been one of the most fluid in the last two decades thanks to the emergence of Grillo's 5 Star Movement, which has throbbed with anger with politics as usual. The movement came against a backdrop of harsh austerity measures imposed by technocrat Premier Mario Monti, who has fared miserably in the elections.

Many eligible voters didn't cast ballots, and a low turnout is generally seen as penalizing established parties. The turnout, at just under 75 percent, was the lowest in national elections since the republic was formed after World War II. Disgust with traditional party politics likely turned off voters, although snow and rain -- this was Italy's first winter time national vote -- also could be a factor.

The decisions Italy's government makes over the next several months promise to have a deep impact on whether Europe can decisively stem its financial crisis. As the eurozone's third-largest economy, its problems can rattle market confidence in the whole bloc and analysts have worried it could fall back into old spending habits.

Bersani, a former communist, has reform credentials as the architect of a series of liberalization measures and has shown a willingness to join with Monti, if necessary. But he could be hamstrung by the more left-wing of his party.

His party would have to win both houses to form a stable government, and given the uncertainty of possible alliances, a clear picture of prospects for a new Italian government could take days. It is all but impossible that Bersani would team up in a "grand coalition" with his arch-enemy Berlusconi.

Grillo's camp also played down the prospect of cooperation with the ex-premier, who has been embroiled in sex and corruption scandals.

"Dialogue with Berlusconi? It is very difficult to imagine that Berlusconi would propose useful ideas (for the movement)," said 5 Star Movement candidate Alessandro Di Battista at Rome headquarters. "It never happened until now, but miracles happen."

Italy's borrowing costs have reflected the optimism that the country will stick to its reform plans.

The interest rate on Italy's 10-year bonds, an indicator of investor confidence in a country's ability to manage its debt, fell to 4.19 percent in afternoon trading Monday. Last summer, at the height of concern over Italy's economy, that interest rate was hovering at about 6.36 percent.

Milan's stock exchange closed slightly higher, with the benchmark FTSE MIB up 0.73 percent to 16,351 points.

With ballots from more than two-thirds of polling stations counted in Senate races, Interior Ministry figures showed, Bersani and his allies had just over 32 percent while Berlusconi and his coalition partners were pulling just under 30 percent. Grillo had more than 24 percent.

More important than the overall national numbers, however, was the state-of-play in large swing regions -- and Berlusconi was projected to win those.

Italy's complex electoral law calls for the Senate seats to be divvied up according to how candidates fare region by region, and Berlusconi appeared to be winning big in Lombardy, and also ahead in the closely watched regions of Sicily and Campania, around Naples.

A Berlusconi triumph in those key regions would likely hand him control of the upper chamber, which in Italy's legislative system is as powerful as the lower house.

Bersani was leading in the lower chamber, where electoral law enables the biggest vote-getter there to end up with a bonus of more than 50 percent of the seats.

Monti's centrist coalition was having a terrible election, with partial results giving his alliance roughly 9 percent. Although respected abroad for his measures that helped stave off Italy's debt crisis, the economist has widely been blamed for financial suffering caused by austerity cuts.

Analysts saw two big stories in Italy's election.

"The first is the big surprising increase scored by the 5 Star Movement, and the other is the disappointing result" of Monti's coalition, said Massimo Franco, a columnist with Corriere della Sera.

Berlusconi, who was forced from office in November 2011 by the debt crisis, has sought to close the gap by promising to reimburse an unpopular tax -- a tactic that brought him within a hair's breadth of winning the 2006 election. The billionaire media mogul only a few days ago told voters if need be, he'd reimburse the tax to them by shelling out from his own pocket to the tune of several billion euros.

Grillo's forces are the greatest unknown. His protest movement against the entrenched political class has gained in strength following a series of corporate scandals that only seemed to confirm the worst about Italy's establishment. If his self-styled political "tsunami" sweeps into Parliament with a big chunk of seats, Italy could be in store for a prolonged period of political confusion that would spook the markets. He himself won't hold any office, due to a manslaughter conviction

Most analysts believe Bersani would seek an alliance with center-right Monti to secure a stable government, assuming parties gathered under Monti's centrist banner gain enough votes.

While left-leaning Bersani has found much in common with Monti, a large part of his party's base is considerably further to the left and could rebel.

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