Deadlock in Italy

Elections in Italy have produced a serious deadlock which threatens to undermine the hopes of an economic recovery in the Eurozone countries in the near future. The outcome was completely unexpected as it was believed that the next government would continue the policies of technocrat prime minister Mario Monti’s centrist government which had given some confidence to other European Union (EU) governments. Political uncertainty is not unknown in Italy which has seen many governments come and go in the last many decades.

But the hung parliament which has now come into being is unprecedented and even the formation of a government would be a  very serious challenge. A majority in both the houses of parliament is required to form an effective  government and no party or alliance has got it now.

The centre-left Democratic Party alliance, led by Luigi Bersani, which was the pre-poll favourite, has secured only 29.54 per cent of the votes and has got a majority in only the lower house.

Former prime minister Silvio Berlusconi’s centre-right People of Freedom Party alliance has performed well with 29.18 per cent of votes and might have a majority in the upper house. The most unexpected outcome was the stellar show of a new party, Five Star Movement, led by a comedian, which secured 25.5 per cent.

The party is against the austerity measures and deficit pruning which are considered essential for taking the country back from the economic precipice where it finds itself now. The party exploited the popular resentment against these policies which had been prescribed by the EU leadership which the Mario Monti government had implemented.
Given the wide differences in the promises and policies of the three major political groups, it will be extremely difficult to form a government.

A new government will also not be able to undertake any effective reform measures as the message from the elections is considered to be anti-austerity.  Italy has the third largest economy in Europe and if it cannot stop its economic slide the repercussions on Europe will be serious.

This, in turn,will have an impact on the world economy too. World markets, in their response to the  election outcome, have given an indication of the rising pessimism about a Eurozone recovery. The pessimism is aggravated by the sense that there is little leeway left now.