MNI: Italy Populists Make Sweeping Gains, Govt Outcome Unclear

--5 Star Movement Secure Most Seats, Lega Top Centre-Right Party

--Democrats May Tilt The Scale, But Renzi Future Uncertain

--No Formation Has Yet Secured Necessary 40% Votes To Govern

     ROME (MNI) - With no clear single winning party, the only clear outcome

from Sunday's Italian vote is the triumph of the populist parties, with a period

of uncertainty and political instability ahead.

     The not-yet-definite results put the centre-right coalition of Silvio

Berlusconi ahead (37% of votes), although the junior party going into the vote,

the populist Lega party, emerged the bigger party with a vote share approaching

19%. 

     The anti-establishment 5-Star Movement were the largest single party, wih

31.2%. The governing Democrats saw their share of the vote slump to barely 20%,

likely marking the end of former premier Matteo Renzi's party leadership.

     But no party or coalitions secured the necessary amount of votes (40%) to

assure forming a stable government. 5-Star cannot govern alone, but are set to

be a pillar of the next government, or at least a majority element. 

     Tensions in the centre-right coalition are likely to rise over leadership

role as  Berlusconi's Forza Italia underperformed the Lega of Matteo

SalviniAccording to coalition agreements, whoever won the most votes would lead

the centre-right bloc. 

     Possible future government options that take into account mere arithmetic

calculations based on the number of seats in both branches of parliament include

a possible (though highly unlikely) alliance between Lega and the 5-Star. There

is also the possibility of a 'hybrid' cabinet, formed by 5-Star, the Democrats

(but without Renzi) and the leftist Free and Equal party.

     "Paradoxically, the losers -- the Democrats -- might turn out to be

crucial. They are the ones who can tilt the scale of this election outcome. The

number of votes they secured, though too few to rule alone, are enough to ensure

a governing coalition with the 5 Stars, but much will depend on what Renzi's own

future will be," Giovanni Orsina, director of LUISS University School of

Government, told MNI. 

     According to Orsina, it is highly unlikely that Lega teams up with the 5

Stars. "Salvini appears to have won, crushing his ally-rival Berlusconi. There's

no way he will forsake his domain over the centre-right now that he finally has

it. Salvini will look to cash in on his triumph," he said. 

     The 5 Star Movement have repeatedly said they will join forces only with

parties that fully abide to their governing program. 

     Italy now faces stalemate and chaos, as the uncertain electoral outcome

raised instability issues, with negative repercussions Monday morning on Milan's

stock exchange. The yield spread between Italian and German bonds rose to an

early high of 203 bps, 6 bps above Friday's close. 

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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