Italy Confronts Vacuum as Leaders Seek to Avoid Election
Pier Luigi Bersani, leader of the winning coalition in Italy’s elections, appealed to populist Beppe Grillo to show he’s willing to help govern after the inconclusive vote forced leaders into coalition building.
Bersani fell short of the Senate majority needed to form a government, while Grillo’s 5 Star movement captured more than a quarter of the vote in its first national election with a platform that rejects collaboration with established parties.
“Until now they have been saying that everyone must be sent packing, but now they are here too, so they must say what they want to do for this country and for their children,” Bersani told reporters in Rome, his first comments since the Feb. 24-25 vote.
The prospect for a hung parliament and concern the country may need new elections roiled markets, with the benchmark stock index shedding almost 5 percent yesterday and bond yields jumping. To have any chance to govern, Bersani will either have to bring Grillo into the process or join with former Prime Minister Silvio Berlusconi, who lost to Bersani by less than half a percentage point. Grillo refused.
“The people that have destroyed this country are now trying to get back together to carry out reforms to the things that they have destroyed,” Grillo said outside his home in Genoa, Italy. “The public won’t accept that anymore.”
Berlusconi dismissed new elections as not “useful” and said he’d consider an alliance with his rival. Bersani rejected the olive branch, saying he wouldn’t seek any deal with Berlusconi before the new Parliament convenes on March. 15.
“It appears that euro-zone political uncertainty is back and investors should expect higher volatility as more weight is placed on political news flow,” Azad Zangana, European economist at Schroders Investment Management, wrote in a note.
After the results became clear yesterday, 10-year Italian bonds plunged, sending the yield up 41 basis points to 4.9 percent. That was the biggest gain in yield in 14 months. The FTSE MIB stock index plunged with bank shares such as Banco Popolare SC (BP) and Mediolanum SpA (MED) shedding more than 10 percent on concern lenders will face higher borrowing costs.
Italian stock and bonds pared some of yesterday’s slide. The yield on the 10-year bond fell 3 basis points to 4.86 percent, while the FTSE MIB gained 0.2 percent to 15584.41 at 10:05 a.m. in Milan.
Recession-scarred voters repudiated the budget rigor that Bersani and Berlusconi had backed as part of Prime Minister Mario Monti’s unelected government. The economic pain that Monti delivered helped make Grillo, a former comedian, into a political force. The risk for Italy is that a weak government will leave Europe’s second-biggest debtor relative to its economy after Greece vulnerable to financial turmoil.
“I do believe that Italy when it is facing a very critical situation has the force to take some kind of decision,” Senate Finance Committee President Mario Baldassarri said today in a Bloomberg Television interview with Francine Lacqua.
In the four-way race, Bersani, the pre-election favorite, won the lower house by fewer than 130,000 votes. Berlusconi, fighting a tax-fraud conviction and charges of paying a minor for sex, gained a blocking minority in the Senate and Grillo’s Five Star Movement emerged as the single most-voted party in the lower house.
An alliance between Bersani and Berlusconi runs the risk of allowing Grillo to remain the only main opposition party free to cull popular anger to build support.
“If they don’t change strategy and go vote again with similar candidates, the risk is a Grillo landslide,” Giovanni Orsina, a history professor at Luiss Guido Carli University in Rome, said in an interview yesterday.
Bersani said he had no intention to resign as party leader after the election that saw him squander a lead in opinion polls of more than 10 percentage points.
The election result could see President Giorgio Napolitano install an interim government, such as the one headed by incumbent Mario Monti, who scored 10.6 percent, to write a new election law as the prelude to another vote.
“The only viable solution to form a government appears to be a repeat of the grand coalition that supported the Monti government, that is, a PD-Monti-Berlusconi alliance,” Riccardo Barbieri, chief European economist at Mizuho International Plc in London, said in note yesterday. “Such a government would probably have a short horizon and focus primarily on the economic priorities and on reforming the political system.”
An Italian government requires a majority in both houses, which have equal powers. Current rules make it difficult for a party to win both. In the Chamber of Deputies, the coalition gaining the most votes automatically gets 54 percent of the seats. The Senate is apportioned regionally, diffusing the bonus-premium effect. Bersani took 340 seats in the 630-seat lower house, but only 113 seats in the 315-member Senate.
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