Parties may struggle to form govt in Italy

A centre-left group of parties appears to have the best shot at forming a coalition government in Italy after an inconclusive national election, but the challenge is steep and comes amid public anger over austerity measures.

If Italian parties fail to form a governing coalition, new elections would be required, causing more uncertainty and a leadership vacuum, and that possibility rattled financial markets across Europe on Tuesday.  On Wednesday trading in Milan, the FTSE MIB rebounded 0.5 per cent even though the country had to pay higher borrowing costs in a pair of bond auctions. The index has a long way to go to recoup the previous day’s 4.9 per cent fall though.

Pier Luigi Bersani and his centre-left allies appeared on Tuesday to have won a narrow victory in the lower house of parliament, while the Senate looks split with no party in control. Silvio Berlusconi, the former Italian premier, did better than expected, is a key player.

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