Italy’s parliamentary elections are heading for a hung parliament, with a center-right coalition set to win more seats than the anti-establishment Five Star Movement (M5S).
The election has turned Italian politics on its head, with far-right, anti-establishment and euroskeptic parties seeing strong gains.
As the official vote count continued on Monday morning, after the ballot on Sunday, it showed the Five Star Movement (M5S) would be the largest single party, but a center-right bloc — which features former Prime Minister Silvio Berlusconi‘s Forza Italia party — would gain the most seats.
With three-quarters of the vote counted, as of 9:00 a.m. local time, the early results showed that no one party or bloc would have a majority of votes enabling it to govern alone. This signals a potentially long, drawn-out and likely fractious negotiation process in order to form a government.
Government vote data on Monday morning showed the center-right alliance with around 37 percent of the vote and anti-establishment M5S with 32 percent of the vote. The center-left bloc, including the Democratic Party (PD) which took a drubbing in the vote, was seen with 23 percent of the vote.
An earlier exit poll indicated that the center-right alliance would gain between 248 to 268 seats in the lower house of parliament, short of the 316 needed for a majority. This center-right bloc is formed of Berlusconi’s Forza Italia and the center-right party Noi con l’Italia, as well as Lega (formerly Lega Nord) and Fratelli d’Italia.
Crucially, the vote count so far appeared to show the anti-immigration and euroskeptic party Lega, led by Matteo Salvini, with a higher share of the vote than Berlusconi’s Forza Italia. This means the party could push its right-wing agenda at a national level in a future coalition government.
Salvini said the result was “historic” for his party, one which has moved away from its roots of campaigning for an independent northern region to campaign on a national level. He tweeted his thanks to voters.
Meanwhile, Italy’s defeated PD party looks likely to end up in opposition. “If this is the result, for us it is a defeat, and we will move into the opposition,” PD lower house leader Ettore Rosato said late on Sunday, according to Reuters.
The final outcome of the election is expected later on Monday. Italy’s financial market reacted badly to the vote, with the FTSE MIB opening 2.2 percent lower on Monday morning. Italian sovereign debt also underperformed.
In the currency markets, the euro was fairly stable against the dollar after the exit poll at 11:00 p.m. local time Sunday. The single currency was trading higher by around 0.2 percent before the poll, but edged lower during the night and was trading down 0.1 percent by 9:00 a.m. local time on Monday.
If the final result is a hung parliament then weeks of talks between the parties could lie ahead. The Italian constitution specifies no time limit for parties to reach an agreement or call a fresh election.
M5S has not entered any coalition, although party leader Luigi Di Maio told CNBC in early February that if the party did not gain a majority to govern alone, it was willing to speak to other parties, although he did not say which ones.
Thus, potentially M5S could link up with other parties to form a coalition large enough to gain a majority in the lower house. Likewise, the center-right alliance could also renegotiate with other parties.
Kit Juckes, chief global strategist at Societe Generale, said that the Italian election had “produced slightly more uncertainty than expected” with the center-right’s success being dominated by Lega Nord’s gains.
“Pretty much all pundits rule out an alliance between Five-star and Lega Nord, expecting instead a protracted period of coalition-building led by the center-right,” he said in a research note.
Sunday’s vote is being closely-watched in Europe to see if populist, anti-establishment parties such as M5S could take a governing position in the Italian parliament. Following an election campaign that featured immigration as a hot topic, the vote was seen as test of strength for far-right parties, such as Fratelli d’Italia and Lega, that have campaigned on an anti-immigration stance.
European politicians will be watching the result with concern as it could prompt the euro zone’s third-largest economy to take a more critical and oppositional stance to the European Union and the single currency. Lega leader Salvini has repeatedly called the euro a “failed experiment” and has criticized Europe.
Sunday March 4 had started positively for Europe with Social Democratic Party (SPD) members in Germany voting to approve the party joining a so-called grand coalition with Chancellor Angela Merkel’s conservative bloc, ending political instability there, just as it started in Italy.
Italy’s fragile economy was also a feature in the run-up to the election with somewhat lackluster growth and an unemployment rate of 11.1 percent dominating the debate. On Friday, fourth-quarter gross domestic product (GDP) showed the economy expanded by 0.3 percent from the previous quarter.
The country’s banking system is still mired in non-performing loans amounting to more than 300 billion euros ($368.5 billion). Italy’s debt-to-GDP ratio stood at 133 percent in 2017, according to the International Monetary Fund.
