This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Q&A: Why Italian Election Has Shaken Investors

By DAVID McHUGH

FRANKFURT, Germany (AP) â¿¿ Italy's inconclusive election has rattled markets and raised the fear that Europe's crisis over too much government debt could flare again after several months of calm.

European stocks fell sharply Tuesday and Italy's borrowing costs climbed after voters rejected the austerity policies and reforms of the former Prime Minister Mario Monti.

Yet no political group won enough seats to control both houses of parliament. In the voting, a center-left alliance led by Pier Luigi Bersani won control of the lower house, barely beating the center-right alliance of former Prime Minister Silvio Berlusconi. Bersani's forces did not win control of the Senate upper house, not even with the help of a small group led by Monti

Much remains uncertain: how long it will take to form a government, whether it will be solid enough to pass legislation, and whether it would keep Monti's pro-growth reforms.

If nothing works out, there could even be new elections.

Here are questions and answers about why all that worries people elsewhere in Europe and beyond.

Q: Why all the investor alarm?

A: Above all, investors are afraid the eurozone will go back to where it was last July.

Then, doubts about the ability of heavily indebted euro countries Spain and Italy to manage their debts raised the specter of a government defaulting on its bond payments and spreading financial turmoil across Europe.

It was only when the European Central Bank offered to buy unlimited amounts of an indebted country' bonds that the crisis abated.

Q: Are there other worries?

A: Italy is an important partner in fixing the euro's deeper problems â¿¿ such as creating an EU banking supervisor that could strengthen the region's financial system. Having the third largest country politically paralyzed will slow down an already drawn-out process.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,804.71 -238.19 -1.40%
S&P 500 1,946.16 -26.13 -1.32%
NASDAQ 4,422.0850 -71.3050 -1.59%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs