Italian Election Inconclusive; Early Global Markets Drop
ROME -- Italy emerged from elections Tuesday with no clear winner, driving markets around the world markedly lower as investors worried that one of Europe's biggest economies would be unable to build a governing coalition that can stay the course on unpopular austerity measures.
A day after polling ended, a few seats in Parliament based on Italians' voting abroad still remained to be decided, but their numbers won't ease the gridlock. European leaders pleaded with politicians in Italy to quickly form a government to continue to enact reforms to lower Italy's critically high debt and spare Europe another spike in its four-year financial crisis.
If Italian parties fail to form a governing coalition, new elections would be required, causing more uncertainty and a leadership vacuum.
"What is now decisive for Italy -- but, because Italy is such an important country for Europe, also for the whole of Europe -- is that a stable government that is capable of acting can be formed as quickly as possible," German Foreign Minister Guido Westerwelle told reporters in Berlin.The results of the election are a rejection of the tough austerity approach of the previous technocratic government led by Mario Monti. A center-left coalition led by Pier Luigi Bersani appears to have won a narrow victory in the lower house of parliament, while the Senate looks split with no party in control. Italy's FTSE MIB index was trading 4.7% lower at 15,586, having earlier been nearly 5% down at one point Tuesday. Some of its banking stocks were briefly suspended after precipitous falls at the bell. The interest rate on the country's benchmark 10-year bond -- an important gauge of investor sentiment -- rose by 0.25% to 4.74%. Investors sought protection in the bonds of more stable and prosperous economies, and the interest rate on Germany's 10-year bonds fell 0.10% to 1.47%. Whether Tuesday's negative market reaction extends further into the week depends on how quickly a solution is reached in Italy. Silvio Berlusconi, the former Italian premier whose center-right coalition did better than expected, insisted that a government can be formed and called on Italians to ignore the "crazy markets." Berlusconi is a key player as his coalition is now the second-biggest bloc in the upper chamber.
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