Protest votes add to uncertainty in close Italy election

ROME (Reuters) - Polls in Italy opened for the second day of voting on Monday in one of the most closely watched and unpredictable elections in years, with a surge in protest votes fuelling fears of an unclear outcome that could hamper economic reform.

A bitter campaign, fought largely over economic issues, has been closely watched by financial markets, still wary after the debt crisis that took the whole euro zone close to disaster and brought technocrat prime minister Mario Monti to office in 2011.

For the euro zone, the stakes are high. Italy is the third largest economy in the 17-member bloc and the prospect of political stalemate could reawaken the threat of dangerous market instability.

Opinion polls give the centre-left coalition led by the veteran former Industry Minister Pier Luigi Bersani a narrow lead but the race has been thrown open by the prospect of a huge protest vote against austerity policies imposed by Monti and rage at a wave of corporate and political scandals.

Voting ends at 3 p.m. (1400 GMT) on Monday, with the first exit polls due shortly afterwards. Projections based on the vote count will be issued through the afternoon and the final result should be known late on Monday or early Tuesday.

The result is likely to be the most fragmented in decades, with the old left-right division disrupted up by the rise of the anti-establishment 5-Star Movement of comic Beppe Grillo and the decision of outgoing prime minister Mario Monti to run at the head of a centrist bloc.

Grillo has electrified the race with a furious campaign against corruption and privilege in the elite.

"It will be a vote of protest, maybe of revolt," said a front page editorial in Corriere della Sera, Italy's largest newspaper, on Monday.

After the first day of voting on Sunday about 54 percent of voters had cast their ballots, a sharp fall on the level of 62.5 percent seen at the same stage in the last election in 2008.

Bad weather hampered the turnout in Italy's first post-war election to be held in winter.

Luigi Bartoletti, a 57-year-old salesman from Rome said he had voted for the 5-Star movement.

"But unfortunately I don't believe there will be a stable government," he said. "The hope is that by voting for these people, even if they're inexperienced, there may be at least some checks on the management of public affairs."

The 5-Star Movement, heavily backed by a frustrated younger generation increasingly shut out of full-time jobs, has polled strongly and some believe it could challenge former premier Silvio Berlusconi's PDL party as Italy's second largest political force.

"Come on, it isn't over yet," was Monday's front page headline in Il Giornale daily, owned by Berlusconi's brother, a call to arms to voters not to give up.

The 76 year-old Berlusconi has campaigned fiercely at the head of a centre-right coalition, pledging sweeping tax cuts and echoing Grillo's attacks on Monti, Germany and the euro in a media blitz that has halved the lead of the centre-left since the start of the year.

Support for Monti's centrist coalition meanwhile has faded and he appears set to trail well behind the main parties.

SENATE RACE

Whatever government emerges will inherit an economy that has been largely stagnant for much of the past two decades and problems ranging from record youth unemployment to a dysfunctional justice system and a bloated public sector.

At the same time, the credibility of the political system has been hit by corruption scandals and criminal investigations affecting state-controlled defense group Finmeccanica and Italy's third-largest bank Monte dei Paschi di Siena.

Despite the opinion polls suggesting the centre-left is leading, it is far from clear that Bersani will be able to control both houses of parliament and form a stable government capable of lasting a full five-year term.

Italy's electoral laws guarantee a strong majority in the lower house to the party or coalition that wins the biggest share of the overall national vote.

However the Senate, elected on a region-by-region basis, is more complicated and the result could turn on a handful of regions where results are too close to call, including Lombardy in the rich industrial north and the southern island of Sicily.

Many politicians and analysts believe Bersani and Monti will end up in an alliance after the vote, despite a number of spiky exchanges during the campaign and Monti's insistence that he will not join forces with Bersani's leftist allies.

For his part, Bersani, who has pledged to maintain the broad reform course set by Monti while doing more to help growth, says he would seek support from other parties and would be ready to offer the former European Commissioner a job in his government.

But there is no guarantee that it would be possible to form a stable alliance that would also include far-left partners or trade unions that have fiercely opposed key reforms by the Monti government including attempts to ease hiring and firing rules.

After repeated rounds of tax hikes and spending cuts, sliding wages and declining standards of living, Italians are increasingly weary of the austerity medicine prescribed by Monti to prevent Italy's huge public debt from sliding out of control.

(Additional reporting by Stefano Bernabei and Gavin Jones; Editing by Stephen Powell and Pravin Char)

Source: http://news.yahoo.com/protest-votes-add-uncertainty-close-italy-election-070325879.html

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