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Regional elections foretell turmoil in Italy

Published October 30, 2012 5:00 pm

This is an archived article that was published on sltrib.com in 2012, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

Rome • Italy risks heading into political turmoil after a regional election showed a huge level of voter distrust in mainstream political parties, a result that could also rattle financial markets that have no small role in deciding the fate of the economically troubled nation.

A protest party candidate from a movement launched by a TV comic made a strong showing in Sicilian elections Sunday, a vote seen as a test of popular sentiment before nationwide polls in the spring to replace the government of Premier Mario Monti. The Sicily vote also was marked by sharply lower turnout, down to 47 percent of eligible voters from 67 percent in the 2008 regional elections.

The populist Five Star Movement garnered 18 percent of the vote — not enough to win the governorship because other parties ran in alliances, but still making it the top vote-getting party and a force to be reckoned with. Movement leader Beppe Grillo attracted large audiences with his attacks on Monti's austerity policies and the seemingly endemic corruption among Italy's major political parties.

"Without doubt this result is not positive for market confidence and increases uncertainty ahead of the general election next spring," said an analysis by economists Chiara Corsa and Loredana Federico for UniCredit, Italy's largest bank.

Monti's government of technocrats imposed a painful austerity program and has started in on reforms that together have succeeded in bringing down Italy's borrowing costs, which had skyrocketed when his predecessor, media magnate Silvio Berlusconi, lost the confidence of markets that he could bring Italy's finances under control and balance the budget.

Italy's benchmark 10-year bond yield rose Monday after the release of the Sicilian election results — from 4.85 percent to 4.94 percent, a sign that investors have become somewhat more cautious about the country's financial future. The bond yield edged back only marginally to 4.92 percent on Tuesday.

But Monti's term ends in the spring and he has ruled out running for premier, although he has left the door open for a second term if no party wins a clear majority and he is tapped to head another government. There has also been talk of Monti serving as finance minister in a government next year, a move that would also please Italy's eurozone partners.

Monti, speaking at a conference of the World Economic Forum in Rome on Tuesday, directed himself to Italy's political class as he sketched a picture underlining the virtue of unpopular — but necessary — policy.

"The really important thing is, we have done very unpleasant things, unpleasant things for the receivers and even unpleasant for the doers. The perception of what this government is doing is not fully good. But it is higher than that of any of the parties," Monti said.

"This is an important message for future governments: Do not believe that you cannot do the right policies, otherwise you risk your position in the future," he said.

A further unknown is Berlusconi's intentions. He had been supporting Monti's government and recently suggested he planned to retire from politics.

But the 76-year media magnate may have changed his mind after a court in Milan convicted him Friday of tax fraud. He attacked Monti, complained that Germany had too much control over Italy's economic decisions, and said he would stay in politics to reform the justice system.

Political analyst Massimo Franco, writing in the leading Corriere della Sera, said Italy is paying the price for Berlusconi's "sad decadence and his system of power." He also wrote that the Sicilian election result is a warning that the country risks becoming ungovernable.