Italy election early projections throws country into political stalemate

Italian voters delivered a hung parliament on Sunday, flocking to anti-establishment and far-right parties in record numbers and casting the euro zone’s third-largest economy into political gridlock, initial results showed.

If early projections are confirmed, none of Italy’s three main blocs or groups will be able to rule alone and there is little prospect of a return to mainstream, moderate government, giving the European Union a new headache to deal with.

Scenarios now include the creation of a more euro-skeptic coalition, which would almost certainly push for a significant jump in welfare spending and challenge EU budget restrictions, or swift new elections to try to break the deadlock.

A rightist alliance including former Prime Minister Silvio Berlusconi’s Forza Italia (Go Italy!) emerged with the biggest bloc of votes, ahead of the anti-system 5-Star Movement, which saw its support soar to became Italy’s largest single party.

The ruling centre-left coalition came third, hurt by anger over growing poverty, high unemployment and mass immigration.

The full result is not due for many hours and previous elections in Italy have seen wild swings as the count proceeds.

A prolonged political stalemate could make heavily indebted Italy the focus of market concern in Europe, now that the threat of German instability has receded after the revival on Sunday of a grand coalition under Chancellor Angela Merkel.

The euro dipped in Asia early on Monday, but remained prone to volatility as investors awaited final results.

“Italy is far from having sorted its long-standing problems, and now it will have new ones. Be prepared for long and complex negotiations that will take months,” said Lorenzo Codogno, a former chief economist at the Italian Treasury.

Berlusconi’s centre-right alliance was seen taking around 37 percent in the upper house Senate, but in a bitter personal defeat for the billionaire media magnate, his Forza Italia party was overtaken by its ally, the far-right, anti-immigrant League.

“My first words: THANK YOU,” League leader Matteo Salvini tweeted.

The biggest winner of the night was clearly the 5-Star Movement, which was predicted to have won a third of all votes cast, while the ruling centre-left Democratic Party (PD) was projected to see its support collapse to 18.9 percent.

“This is a real moment of glory,” Alessandro Di Battista, a leading 5-Star figure, told reporters as the first results arrived.“Everyone will have to come and talk to us,” he added.