Friday, February 22, 2013

Outcome of Italy election deeply uncertain two days before vote

By Steve Scherer and Barry Moody

ROME (Reuters) - Italy's election campaign drew to a close on Friday with the weak performance of outgoing premier Mario Monti key to a deeply uncertain and potentially unstable result.

Outgoing Prime minister Mario Monti speaks during a rally in Florence, February 22, 2013. Italians vote on Sunday and Monday for a successor to Mario Monti's technocrat government whose austerity policies saved Italy from a Greek-style debt crisis but did nothing to pull it out of deep recession.REUTERS/Jennifer Lorenzini

Political leaders were holding their final rallies before a campaigning ban ahead of voting on Sunday and Monday, and analysts said the result was too close to call.

"This vote is not at all certain. One percentage point either way could lead to chaos or a clear winner," said one pollster who asked not to be named because of a two-week ban on opinion surveys.

Analysts are divided over whether centre-left leader Pier Luigi Bersani will be able to form a stable majority capable of pursuing the economic reforms that an uncompetitive Italy needs to exit recession.

Bersani is thought to be just a few points ahead of centre-right leader Silvio Berlusconi but is still seen with a good chance of the winner's bonus that will give him comfortable control of the lower house.

However, the election will revolve around the much more complex Senate race, where winners' bonuses are awarded on a regional basis.

The centre-left and centre-right are close to a draw in several battleground regions, including industrial powerhouse Lombardy, which returns the most senators. Berlusconi formed an alliance with the federalist Northern League because of the importance of populous northern regions in the Senate race.

Monti, a technocrat former European commissioner who has led a lacklustre centrist campaign, is believed to be fading but analysts disagree about the implications.

Electoral expert Roberto D'Alimonte expressed concern that Monti may fall below the 8 percent threshold to win Senate seats in some regions and said this could be disastrous for Italy.

"What is really important is that Monti does not fall under eight percent in several regions. The future of Italy and the euro zone depend on this variable, " he told Reuters.

The most likely - many say the most stable and pro-reform result from the election - appears to be a governing alliance between Bersani and Monti, which would require the outgoing premier to win enough Senators to boost the centre-left.

Bersani has suggested he wants to form an alliance with Monti to give his government credit with the markets and a strong law-making mandate, even if the centre-left wins on its own.

WEAK MONTI

However, some other analysts believe that Monti is fading in the so-called "red centre" of Italy where the votes he loses will go to Bersani, increasing the chances of a strong centre-left government which will be able to drive a hard bargain with a weakened Monti over policy.

One of the unstable scenarios after the vote would be a government ranging from leftists to a strong, centrist Monti, which could become entangled in constant policy disputes.

"If Monti doesn't do well in the Senate it will be to the benefit of the (centre-left) Democratic Party (PD)," Maurizio Pessato, vice president of SWG pollsters, told Reuters.

"The key with this electoral system is not Monti, it's the PD winning Lombardy...If the centre-left wins the Senate outright it will make an alliance with Monti from a position of strength. There will be a government and stability."

Pollster Nicola Piepoli told Reuters: "Bersani will gain. He is the principle beneficiary of Monti's crisis...this makes it more likely that he can win in the Senate."

Whatever government emerges from the vote, it will need to address Italy's deeply uncompetitive economy, in its longest recession for 20 years, and stagnant for two decades.

The biggest danger for Italy and the euro zone is that the election produces a weak government incapable of decisive action, spooking investors and igniting a new debt crisis.

The disappointing performance by Monti, darling of the markets and European governments, has been a feature of a bitter campaign that has also seen a stunning resurgence by Berlusconi and major success for Genoese comic Beppe Grillo, who has exploited huge public anger over the economy and a rash of corruption scandals.

The latter two factors have whittled away a commanding 10- point centre-left lead in December and made the election result increasingly uncertain.

Monti replaced Berlusconi in November 2011 after the media tycoon had taken Italy towards a perilous debt crisis and became embroiled in a series of personal scandals. He restored Italy's international credentials and sharply reduced the country's borrowing costs.

But he has been a much worse candidate than premier. Experts say he was badly advised, including by U.S. consultants who have worked for President Barack Obama, and clumsily attempted to join political mud slinging instead of retaining his aloof professorial demeanour as prime minister.

"If he was seen by Italians as a robot, then he should have been a robot in the election campaign. If you change behaviour then you are not seen as genuine," said Antonio Noto, head of the IPR polling company.

Monti was also an easy target for both Berlusconi, whose campaign centred on attacking the prime minister's hated housing tax - and offering to pay it back - and Grillo who nicknamed the stiff economics professor "Rigor Montis."

(Additional reporting by Paolo Biondi, writing by Barry Moody; editing by Anna Willard)

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Friday, February 22, 2013

Outcome of Italy election deeply uncertain two days before vote

By Steve Scherer and Barry Moody