Italy has a new Prime Minister. And it's a surprise one...

Enrico Letta, deputy leader of Italy's centre-left Democratic Party and Pier Luigi Bersani's right hand, is very close to becoming Italy's new Prime Minister. He's currently meeting President Giorgio Napolitano (as you read this blog post), and will be given the mandate to form a new government.

Letta emerged as the main candidate in the last 24 hours. The fact that Napolitano has chosen Letta  is significant for at least two reasons:

• Letta is undoubtedly a politician, as opposed to the previous favourite Giuliano Amato, who would have been seen as a technocratic Prime Minister. This means Napolitano has opted for a political solution to the post-election stalemate;

• Letta is 47, and Amato is 75. So the choice made by 88-year-old Napolitano addresses the Italian electorate's call for a rejuvenation of the political system. This is significant in the 'old vs young' struggle that has characterised Italian politics recently.

We will provide more detailed analysis once Letta unveils his list of ministers. In light of his appointment as Prime Minister, we would now expect politicians rather than technocrats to grab ministerial posts - although we can't rule out the involvement of a couple of technocrats in the new cabinet. 

However, make no mistake: this move doesn't wipe out the deep divisions among the main political parties, and whatever shape the government takes, it won't be easy for Italy to continue with the reforms that the eurozone demands.
    

And Italy's new President is...the old one! What happens next?

It took the Italian parliament almost three days and six ballots to elect a new President of the Republic. Well, newish. Incumbent Giorgio Napolitano, who will turn 88 in June, eventually caved in to pressure and agreed to serve a second term. This is unprecedented in Italian history and shows how deep the country's political crisis is. Unable to overcome the stalemate and agree on a new President, the main parties have turned to the old one and begged him to stay.

The good news is that, following Napolitano's re-election, Italy looks set to have a new government in place sooner rather than later. The big news is the new government would undoubtedly include Silvio Berlusconi's party.  

What happens next? 

• Napolitano will take his second oath this afternoon. From that moment, he will re-gain the power to dissolve parliament and call new elections.

• Crucially, Napolitano has said he will "clarify the terms" under which he agreed to stay on in his (second) inauguration speech. The Italian media are speculating on at least two conditions. First, a shorter mandate than the seven years set out in the Italian Constitution - otherwise Re Giorgio would be leaving office at 95. Second, and most important, the formation of a national unity government - backed by the centre-left Democratic Party, Mario Monti's centrist group and Silvio Berlusconi's People of Freedom party.

• The markets seem to take the formation of a new government for granted, with Italy's borrowing costs going down this morning. 

• The latest from the Italian media is that Napolitano will hold a swift round of talks and could give someone the mandate to form the new government as early as tomorrow. There are reportedly two clear favourites to lead the new government. One is Giuliano Amato, 75 years old, who already served twice as Italian Prime Minister. The alternative is Enrico Letta, Pier Luigi Bersani's right hand. We would put our money on Amato, especially since not everyone within Letta's own Democratic Party is enthusiastic about him being appointed as Prime Minister.

• The new government is likely to be a mix of politicians and technocrats. It will focus its efforts on bringing home 5-6 key reforms, based on the proposals put forward by the ten 'wise men' earlier this month. We expect the new government to give priority to political, rather than economic reform. Top of the agenda will be changing the electoral system, along with reforming a pretty dysfunctional institutional structure where the two houses of parliament have perfectly equal powers.

• In any case, the new government is unlikely to remain in charge for the entire five-year parliamentary term.

Winners and losers of Italy's presidential election

Silvio Berlusconi: Big winner

Whether you like him or not, Berlusconi's handling of the presidential election was masterful. He avoided 'hostile' candidates being elected (think of former European Commission President Romano Prodi or left-wing Law Professor Stefano Rodotà, Beppe Grillo's man). Any new government will be dependent on his party's support - exactly what Il Cavaliere wanted since the beginning. The centre-left is in disarray, and his centre-right alliance is now ahead in all opinion polls. No surprise Silvio was so radiant when Napolitano's re-election became official on Saturday evening.

Beppe Grillo: Winner

Beppe Grillo also comes out as a winner, although his victory is likely to become more obvious in the longer term. The Five-Star Movement's presidency candidate Rodotà was a high profile one. Yet, Rodotà was ignored by Bersani's Democratic Party - which never really considered backing him without giving any plausible explanation for doing so. Ideal conditions for Grillo to claim "a clever institutional little coup" was materialising. We would expect a surge in popular support for the Five-Star Movement - though maybe not in the immediate future.

Pier Luigi Bersani: Big loser

With a couple of poor strategic decisions, Bersani has pushed his party to the edge of a break-up and lost his left-wing ally SEL. After kissing goodbye what could be his once in a lifetime opportunity to become Italian Prime Minister, he also had to step down as party leader. And his party looks set to be in government with Berlusconi again - an option Bersani firmly opposed. Bersani burst into tears the moment Napolitano was re-elected. Some of that may just be relief at his ordeal being over.

So this is where we are at, but things are moving quickly. Keep following us on Twitter @OpenEurope or @LondonerVince for real time updates from Italy.

The election of the new Italian President: Has Silvio just scored another one?

The Italian parliament starts voting to elect the new President of the Republic today. Centre-left leader Pier Luigi Bersani has agreed with Silvio Berlusconi and Mario Monti to back the candidacy of Franco Marini - an 80 years old, pipe-smoking former trade unionist and Senate speaker (see picture).

Bersani faced a clear political choice. He could either support the candidate put forward by Beppe Grillo's Five-Star Movement (law professor Stefano Rodotà) or go for a more Silvio-friendly name. The decision to back Marini is a clear sign that Bersani does not want to burn all the bridges with Il Cavaliere - given that talks on the formation of the new Italian government will resume after the election of the new President.

However, Bersani may have overlooked the knock-on effects of the decision in his own camp. This is what happened after he told his party about his decision yesterday:

• The party split over Marini's candidacy. Florence Mayor Matteo Renzi, regarded by many as Bersani's successor as party leader, called Marini "a candidate from the past century". Italian papers estimate that up to 90-100 members of Bersani's party will not vote for Marini.

• Bersani's left-wing ally Nichi Vendola said Marini's candidacy was "the end of the centre-left". His MPs will vote for Grillo's man instead.

Needless to say, all this plays into Berlusconi's hands. His centre-right alliance looks far more united at the moment, and is ahead in opinion polls. If Marini is elected as President and the split in the centre-left remains (admittedly two big ifs), Il Cavaliere could be tempted to push seriously for a return to the polls - this time with a good chance of victory.

Finally, a quick reminder of how the voting works. There are 1007 'great electors' (all the 630 MPs + all the 319 Senators + 58 regional delegates). There will be two ballots a day - the first one is currently under way. A two-third majority (672 votes) is required in the first three ballots. A simple majority is sufficient from the fourth ballot on.

Ballots are secret, so it's hard to predict whether Marini will make it in one of the first three ballots. Expect the vote to be very tight anyway. If Marini fails to achieve the two-thirds majority, Bersani may consider putting forward another name to try and repair some of the damage made to his party.

Follow us on Twitter @OpenEurope and @LondonerVince for all the updates on the vote.    

How many wise men does it take to fix Italian politics?

Markets remain deceptively calm as uncertainty rumbles on in Italy. Italian President Giorgio Napolitano has created two commissions, now known as the ‘wise-men’, which will seek to find some common ground between the various political parties in Italy and therefore, potentially, provide a basis for a coalition government. Although, they only have 8 to 10 days to do so.

The first committee with look at economic, social and European affairs, while the second will focus on institutional (in particular electoral) reform. Napolitano has been at pains to stress that the committees will not determine an agenda for a new government or set any policies; they will simply look to facilitate fresh dialogue and find areas which the parties can work together on.

So where does each party stand now? What are the prospects of finding some ground to build a coalition upon?

Pier Luigi Bersani and his centre-left group:

• Bersani has continuously ruled out entering a grand coalition with Berlusconi’s centre-right group and yesterday reiterated this position, adding that such a government would be paralysed.
• That said, Bersani has warned that new elections would be “disastrous”. Having failed to form a viable government after being given the mandate by the President it is unclear exactly what Bersani wants, particularly with his options dwindling quickly.
• An SWG poll suggests Bersani’s party’s trust in him has fallen to 30% while behind the scenes trust in Florence Mayor Matteo Renzi has reached 55% (+6%), while 66% of Italians say they would like him to guide the centre left instead.

Silvio Berlusconi and his centre-right group:

• By some polls this group is now ahead. In any case they remain a formidable force and are playing their hand by insisting on a grand coalition or fresh elections.
• Yesterday, Berlusconi’s party accused the centre left of pandering to “factional interests” rather than needs of the country.

Beppe Grillo and his Five Star Movement:

• Has ruled out taking part in a coalition government. Has also ruled out providing a formal backing to a technocratic government. May consider providing support to a government on certain issues but remains unclear exactly what conditions would be needed for this.
• Has been critical of the ‘wise-men’ calling them "domestic carers for democracy".

So, the groups remain split along some fairly fundamental lines. Some elements of consensus may be found but it remains unlikely that these will be enough to form a workable long term coalition. A more likely outcome remains a grand coalition being put in place to push through some electoral reform ahead of new elections. A similar scenario with another technocratic government is also possible.

At the same time the new Presidential elections loom large. Voting begins on the 18 April with Napolitano’s term officially expiring on 15 May. This is likely to lead to further delays in forming a government. Napolitano looks set to pass the problem onto his successor, with many criticising the formation of the working groups as a way to eat up time. He can also not call new elections, meaning that the new President would be responsible for doing so – realistically then they cannot take place until June.

Another month or two of uncertainty seems likely in Italy, and any certainty may only come with new elections being announced (itself a source of further uncertainty). Markets have been calm so far, but with the acute problems in Cyprus dying down the spotlight could once again turn on Italy.

Italy: Bersani failing to form government wouldn't automatically mean new elections

There were rumours of a further postponement until Good Friday, but Italy's centre-left leader Pier Luigi Bersani has confirmed he will meet President Giorgio Napolitano tomorrow and report on the outcome of coalition talks with other political parties. The truth is talks haven't gone particularly well. At the moment, Bersani doesn't seem to have the numbers to win a preliminary vote of confidence in the Italian Senate - absent which the new government wouldn't be allowed to enter office.  

Clearly, Bersani's failure to form a government would make snap elections more likely. But there is still some room left for negotiations. For the moment, we have tried to imagine the content of the meeting between Bersani and Napolitano (providing no eleventh-hour U-turns occur).

Scenario 1: Bersani admits he doesn't have the numbers and asks for more time to strike a deal 
This is fully possible, and it shouldn't be a big problem for Napolitano to give Bersani more time for a second round of talks. However, it is unclear how much an extension of talks would change if none of the big parties moves from its current position.

Scenario 2: Bersani admits he doesn't have the numbers, but asks to be sworn in anyway
Bersani's reasoning here would be that, when the time to vote the confidence to the new government comes, some Senators (mainly from the Five-Star Movement) would break ranks and back him. This is a huge gamble, though. At the moment, even assuming that Monti's Senators all vote the confidence to the new government, Bersani would still need at least 15 Senators to reach the minimum required majority of 160.

As such, Napolitano may not want to run the risk - and here is why. When a new government is sworn in, it must win a vote of confidence in both houses of the Italian parliament within ten days from the oath before it can enter office. If it fails to do so, it stays on as caretaker while the Italian President decides what to do next. But Napolitano is quite keen to keep Monti as caretaker instead - so he will probably only agree to swear in a government which can realistically win the vote of confidence.

A boring (but necessary) caveat before we move on to Scenario 3. It is possible for Italian Senators to leave the chamber before a vote, so that they are 'absent' when the roll is called. Absent Senators don't count, meaning that the required majority goes down. Now, Lega Nord leader Roberto Maroni has hinted at the possibility of his and Berlusconi's Senators leaving the chamber en bloc before the key confidence vote to a hypothetical new centre-left government - allowing Bersani to win the vote.

Of course, Maroni made clear this could happen only if "certain conditions" were met - including an agreement to elect a man close to the centre-right as the next Italian President next month. But this could potentially be a way out of the impasse.

Scenario 3: Bersani throws in the towel and hands his mandate back to President Napolitano
This wouldn't automatically mean new elections - which, in any case, can only be called by the new Italian President when he enters office in mid-May. Napolitano would have to start a new round of talks and then decide what to do. As we explained in previous blog posts, the most likely outcome would be the Italian President proposing a temporary 'national unity government'.

The new cabinet would be led by someone from outside of 'traditional' party politics (the word 'technocrat' seems to have gone out of favour in Italy these days) - but the ministers could indeed come from political parties. It is unclear whether Berlusconi's party would grant its support, but this solution may have some chances of winning the Five-Star Movement's backing. This 'national unity government' would pursue a clearly limited agenda, and pave the way for early elections - perhaps as early as next year, but with a new electoral law.

It's all very much up in the air in Italy at the moment, but in case of a definitive breakdown of talks everyone will suddenly be reminded of which country should be the eurozone's real concern.  

A grand coalition with Silvio is hard to swallow for Bersani, but...

The leader of Italy's centre-left Democratic Party, Pier Luigi Bersani, is in an unenviable position right now. He has been asked by Italian President Giorgio Napolitano to go and meet pretty much everyone (trade unions, employers' associations, political parties) and see if he can get the support he needs to command a majority in Italy's hung Senate. Bersani will report back to Napolitano on Thursday, and is due to meet a delegation from Silvio Berlusconi's PdL party this afternoon.

Berlusconi is playing the hand he has been dealt quite well, taking advantage of Beppe Grillo's refusal to cooperate. Il Cavaliere has already set his conditions for supporting a Bersani-led government: Angelino Alfano (the Secretary General of Berlusconi's party) should be the Deputy Prime Minister, and a man close to the centre-right should be elected as the next Italian President.

Bersani has so far rebuffed Berlusconi's offers, but we have thought of at least three reasons why he may eventually change his mind:

• Bersani is probably facing a 'once in a lifetime' opportunity to become Italian Prime Minister. He is already 61 (although age is not necessarily an obstacle in Italian politics), and if Italy were to return to the polls he would likely come under huge internal pressure to step down as party leader and give way to someone else. Remember Bersani was at the front of an electoral campaign during which his centre-left alliance squandered a double-digit lead in the polls in about two months. Florence Mayor Matteo Renzi seems to be the most obvious candidate to replace Bersani in case of new elections.

• More generally, Bersani's own party is already split on this specific issue - with a group of key members close to Renzi not hostile to cooperation with Berlusconi. Reggio Emilia Mayor Graziano Del Rio, for instance, told La Repubblica that if Italian President Giorgio Napolitano were to propose a 'national unity government' (which in Italian political jargon is also known as Governo del Presidente, the President's government), Berlusconi's and Bersani's parties should not be "picky" and should work together for the good of the country. Bersani can't afford to just ignore these voices if he wants to preserve his party's unity in the longer term.   

• Italy's three largest trade unions - which have close ties with Bersani's party - have explicitly come out against new elections and urged Bersani to form a government "at any cost".

The situation remains extremely fluid, but if cooperation with Berlusconi were the only alternative to re-run elections, these are three reasons why we believe Bersani would at least think twice before sending Italians back to the polls. 

Italy: Will Bersani have any luck in forming the new government?

While the spotlight has firmly been on Cyprus these last few days, over in Italy centre-left leader Pier Luigi Bersani has just been given a mandate to try and form the new government by President Giorgio Napolitano.

Bersani has been explicitly asked to talk to other political leaders and report back to President Napolitano "as soon as possible" - we assume this will happen at some point next week. Basically, he will have to prove that his government would be supported by a majority in the Senate - the hung upper house of the Italian parliament - before he gets the definitive go-ahead.

So what happens next?

• Bersani will try to convince the other parties to back his plan for a 'minority government', which would seek parliamentary support on a law-by-law basis. It's going to be difficult. Beppe Grillo's Five-Star Movement doesn't want to do business with anyone, while Silvio Berlusconi is clearly in favour of a proper 'grand coalition' with Bersani - as this could see his party getting several ministerial posts. However, President Napolitano himself has today acknowledged that a 'grand coalition' presents "relevant difficulties".

• If Bersani does not succeed, he will have to give up his mandate to the President - who will then have to task someone else with forming the new government. This person would probably be someone from outside of traditional politics - that is, someone capable of gathering cross-party parliamentary support as Mario Monti did in November 2011. As we've noted, incumbent Interior Minister Anna Maria Cancellieri and Senate speaker Pietro Grasso are the names doing the rounds in the Italian press.

• Failing this, the only option left would be new elections. A slightly untimely outcome, given what's happening in Cyprus (think market pressure).

In the meantime, Mario Monti stays on as caretaker Prime Minister - he will leave office only after the new cabinet is sworn in. Keep following us on Twitter @OpenEurope and @LondonerVince to stay on top of events in Italy (and beyond).
   

Beppe Grillo demands Five-Star Movement government and euro referendum

Remember Italy?

Looking unusually smart in his dark suit, Beppe Grillo, along with some of his Five-Star Movement colleagues, this morning opened the second day of talks with President Giorgio Napolitano on forming the new Italian government.

After the meeting, Grillo's parliamentary whips Vito Crimi and Roberta Lombardi (see picture) read a short declaration to the press. The following three points stood out:

• The Five-Star Movement's 20-point plan for government would include a referendum on Italy's membership of the euro. This now seems to have become official party policy; 

• The Five-Star Movement wants "a full mandate" to form a government of its own choosing;

• If the Five-Star Movement fails to obtain the mandate, it will request the chairmanship of two key parliamentary committees: COPASIR, which is in charge of supervising Italy's intelligence services; and the committee in charge of supervising Italy's public broadcaster RAI.

On his blog, Grillo has just ruled out supporting "political or pseudo-technocratic governments". This sounds very much like a definitive 'no' to any solution other than a cabinet led by the Five-Star Movement itself, and essentially leaves two options open:

• A national unity government backed by Silvio Berlusconi, centre-left leader Pier Luigi Bersani and possibly Mario Monti. Such a government could be led by either Bersani himself or someone from outside of politics. Incumbent Interior Minister Anna Maria Cancellieri and newly-elected Senate speaker Pietro Grasso (a former anti-mafia prosecutor) are the names doing the rounds in the Italian media at the moment;

• New elections. These could, however, only be called once the next Italian President takes office in mid-May (we explained why in our response to the Italian election results).

Bersani is due to meet President Napolitano this evening at 5pm (GMT). The prevailing view in the Italian media is that the President may announce the name of the (first) person tasked with forming the new government by tomorrow evening, or Saturday morning at the latest.

We'll keep you posted with real-time Twitter updates from Italy. Follow us @OpenEurope or @LondonerVince.     

Beppe Grillo, the Five-Star Movement and the euro enigma: Episode 2,478

We have noted on this blog before that it would be a bit of a stretch to describe Beppe Grillo's Five-Star Movement as an anti-euro party - mainly because it has yet to adopt an official position on the issue. At the moment, not even the referendum on Italy's membership of the single currency appears in the Five-Star Movement manifesto.

According to an ISPO poll published by Il Corriere della Sera on Sunday, if this referendum were to take place in Italy, 73% of Five-Star Movement voters would opt to stay in the euro - and only 17% would vote for a return to the Lira. An overwhelming majority.

However, Professor Mauro Gallegati (see picture) - one of Beppe Grillo's closest economic advisors - gives a slightly different picture in an interview with French business daily Les Echos today. He says, 

The [Five-Star] Movement is still split over the euro. There is a good part of supporters who are in favour of an exit from the single currency. Personally, I’m against [euro exit] because I think the cost to the Italian middle class would be prohibitive. 

So to what extent the Five-Star Movement's electorate can be described as anti-euro remains unclear. But the poll and the interview both leave another key question unanswered. What do the Five-Star Movement's 163 MPs and Senators-elect actually think about the euro? This is quite hard to figure out at the moment, given that they are not allowed to speak to the press. But they may have to take a clearer stance sooner rather than later, not least because official talks on the formation of the next Italian government are due to kick off next week.

Follow us on Twitter @OpenEurope or @LondonerVince for the latest from Italy.

Is Beppe Grillo forcing Italy to new elections?

One-by-one, Beppe Grillo and the Five-Star Movement are shutting all the doors to possible government arrangements. Vito Crimi, designated as the Movement's faction leader in the Italian Senate, told reporters yesterday:

If we were proposed a technocratic government, we would consider it. But we confirm our 'No' to a government of the [political] parties.

Less than 24 hours later, though, Crimi posted the following on his Facebook page (yes, that's how the Five-Star Movement communicates):

I never spoke of support to a technocratic government. The only solution we propose is a Five-Star Movement-led government which implements the first 20 points of our programme immediately.

Grillo himself wrote on his blog this morning,

The Five-Star Movement won't support a technocratic government, and it never said it would do so. There's no such thing as technocratic governments in nature, but only political governments backed by parliamentary majorities. [Mario] Monti's government was the most political of the post-war period.

These remarks overlapped with those made by Stefano Fassina (see picture), the economic spokesman of Pier Luigi Bersani's Democratic Party, who told Canale 5 this morning,

I exclude a technocratic government based on an agenda which has been rejected by [Italian] voters...We're not willing to form a government with [Silvio Berlusconi’s] PdL party, and if Grillo is not willing to back the [next] government, we will have to face a new round of elections, even if this is not what is needed now.

So the possibility of re-run elections has been explicitly mentioned again, as several options for compromise are being struck down. However, reports in the Italian press suggest that President Giorgio Napolitano could still have an ace up his sleeve: Italy's outgoing Interior Minister Anna Maria Cancellieri.

According to Il Corriere della Sera, Napolitano could ask her to form the new government if Bersani failed to do so. Cancellieri would lead a 'government of purpose' - meaning that she would focus on a limited number of urgent reforms, and would seek the parties' backing in parliament on a case-by-case basis. Grillo would probably not change his mind, but Cancellieri could win support from Bersani's and Berlusconi's parties. The rumours are echoed by Italian magazine L'Espresso, which features a biography of Italy's "Iron Grandma" (Cancellieri is 68 years old) on its website.

This solution could be seen by some as more desirable than new elections in the next couple of months. Whether such a government will be able to continue with the reforms Italy needs to re-gain competitiveness within the eurozone is a completely different story.

And who are you again? Grillo's MPs and Senators meet each other for the first time

163 MPs and Senators-elect from the Five Star Movement met in Rome yesterday and today. As an initial party meeting after a general election it was quite unusual: despite belonging to the same party, most of the elected representatives had never heard of each other before, let alone met. Beppe Grillo himself did not know many of them, and that's why he joined the meeting today - along with the Five-Star Movement's media guru Gianroberto Casaleggio. Remember, the Five Star Movement selected its candidates through an on-line survey, so no face-to-face contact involved.

This shows just how far away the Five-Star Movement is from being a traditional political party - by any standard. And there's some more stuff:

• Large part of today's meeting was live-streamed and available to everyone online; 

• At the meeting, each of the 163 parliamentarians-elect was given the opportunity to introduce him/herself to the others, and explain what his/her background and areas of interest were;

• The MPs and Senators-elect are all considered 'spokesmen' and 'spokeswomen' of the Five-Star Movement;

• The 163 today chose their faction leaders in both houses of the Italian parliament by a simple show of hands. The faction leaders will only hold the post for three months, and are to be replaced after that.

Incidentally, the faction leader in the Italian Senate is Vito Crimi, a 40-year old (the minimum legal age to be elected as a Senator in Italy) judicial assistant from the Northern town of Brescia.  The faction leader in the Chamber of Deputies, the lower house, is Roberta Lombardi. She is 39, holds a degree in Law and works for an interior furniture company.

Whatever one thinks of the Five-Star Movement, it was quite impressive to see so many Italian MPs in their thirties (or even twenties) in the same room. Finally some fresh air in Italian politics, some might say. We still don't know what the Five-Star Movement will do next. Grillo made a quick appearance at the very beginning of the meeting today, saying that the Movement will only vote for the laws which fit with its manifesto - but he said that several times before.

It remains to be seen how this enthusiastic but inexperienced lot will react when the new Italian parliament convenes - on 15 March, or a bit earlier - and talks on the formation of the next government enter their decisive stage. The time for post-election celebrations may already be over for the Grillini. The question is: will this innovative approach to party politics hold (think party discipline) when things get serious?

Anti-euro party? Grillo's advisor says leaving the single currency would be "an absurd mistake"

Everyone is trying to figure out the enigma that is Beppe Grillo and what his Five-Star Movement actually wants.

On Europe, for example, where this isn't at all clear. As we've noted, Grillo himself has been very critical of the euro in the past, and toyed with the idea of a return to the Lira - although he is now keen to point out that he never explicitly said that Italy should leave the euro. But his party might be a different matter.

Italian Professor Mauro Gallegati, who is considered one of Beppe Grillo's closest economic advisors and one of the people responsible for writing the party's economic policies, said in an interview with today's Corriere della Sera,

[Italy's euro exit] would be dramatic, an absurd mistake which would reduce Italians' income by 30-40%. If anything, what's needed in Europe is a real political union, as in the US, with a central bank which can devalue the currency.

In other words, the Five-Star Movement can't quite be described as an 'anti-euro party' (as we've said before, see here and here). In fact, 'Europe' doesn't even feature in its manifesto. And remember, the Five-Star Movement is a very fluid construction - what Grillo says in public, or writes on his blog, doesn't automatically translates into 'party policy'. What we do know is that the party is definitely anti-austerity, which inevitably brings it into 'Europe territory'.

If you have not yet done so, watch a short video summary of our breakfast discussion yesterday, in which we sought to decode Grillo in particular and the Italian election results in general.

Grillo: Bersani is a "dead man talking...pestering us with indecent proposals"

Right. So much for an instant Bersani-Grillo love affair (note instant). This is hilarious: 

As expected, Pier Luigi Bersani and his centre-left coalition have tried to reach out to Beppe Grillo. But Bersani didn't quite obtain the reaction he was hoping for.

On his blog, Grillo has posted a round-up of comments made during the electoral campaign by Bersani regarding both the comedian himself and the Five-Star Movement , under the headline "Bersani: a dead man talking" (see the picture). Here's a sample:

• "There's little democracy in the Five-Star Movement." 
• Five-Star Movement people are "web fascists. Come out call us zombies."
• "With Grillo, we will end like Greece."
• "Lenin is not even nearly as bad as Grillo."
• "Grillo leads to disaster."
• "Grillo makes promises like Berlusconi."
• "If Grillo wins, the country will be in trouble."
• "Grillo? He can take us out of Europe."
• "Grillo takes people out of democracy."
• "Grillo is a third-rate autocrat."

Grillo says in the blog post:

"Bersani is a political stalker. He's been pestering the Five-Star Movement for days with indecent proposals, instead of resigning as everyone else would do in his situation."

"Over the past twenty years, [Bersani's] Democratic Party was in government for ten years, and over the past year-and-a-half it even took part in the grand coalition government with [Berlusconi's] PdL party, backing any sort of junk proposed by Rigor Montis [Grillo's nickname for Mario Monti]."

"The Five-Star Movement won't give any confidence vote to the Democratic Party or others. It will support in parliament only the laws that mirror its programme - whoever proposes them." 

So Bersani's first charm offensive (which we explained in more detail here) hasn't been very successful, and the centre-left leader is now in a quite uncomfortable situation. Bersani will almost certainly try again, but if cooperation with the Five-Star Movement proves a non-starter, he may face a tough choice (as we pointed out in our reaction to the Italian election results):

a) Go cap-in-hand to Berlusconi and say, "Scusa Silvio, we just changed our mind. Are you still up for a grand coalition?"

b) Throw in the towel and admit that there is no alternative but to call new elections.

One last thing: it's interesting to note that several people commenting underneath the post urge Grillo to be a bit more cautious, given the "historic opportunity" the Five-Star Movement has to change Italy. Will Beppe listen?  

Italy election: Did a Bersani-Grillo alliance just become a real possibility?

Italy's centre-left leader Pier Luigi Bersani has just held his first post-election press conference. He's clearly not as good at soundbites as Beppe Grillo (or Berlusconi), but this is the gist of what he said:

The centre-left coalition is willing to "take its responsibilities" given that it got most seats in both houses of the Italian parliament;

He said of Beppe Grillo and the Five-Star Movement,

"They used to tell us to 'go home'. Now they're in [parliament] too. Italy is also their country. Let's see what they want to do for their country."

Crucially, Bersani said that, if asked to form the new government, he will put forward a "programme" - basically a to-do list for the next government, including changes to the electoral law, cuts to the cost of bureaucracy and politics in general and new policies for job creation to be discussed at the European level (whatever that means).

His line was that it's more important to "discuss what we want to do for this country" rather than wasting time on "diplomatic" exercises in an attempt to form a 'traditional' coalition.

And that sounds very similar to Grillo said earlier today, i.e. taking a policy-by-policy approach rather than going for a fixed coalition (as opposed to Berlusconi, who seems quite keen on a proper 'grand coalition'). So, could there be some sort of loose Bersani-Grillo alliance emerging?

Still early days...

Beppe as king-maker: will he, won't he?

Beppe Grillo is the man of the moment in Italy and Europe. He, and not Mario Monti as thought, commands enough seats in the Italian Senate to hold the balance of power. So the former Comedian, not the former European Commissioner, could be the king-maker.  But does he want to?

There are plenty of rumours coming our of Italy that Pier Luigi Bersani - whose centre-left coalition holds a solid majority in the lower house of the Italian parliament - is trying to court Grillo somehow. But Grillo may well continue to resist any formal coalition arrangements with other parties - after all that was his entire thing in the run-up to the elections.

Yesterday, he insisted on La Cosa, the Five-Star Movement official TV / radio online station, that he is not going to make inciuci, inciucetti, or inciucini -  Italian slang to describe backroom deals - with anyone.  

But only an hour ago he told journalists outside his house in Genoa,

We talk about programmes. We're not against the world. We'll see reform by reform, law by law. If there are proposals that fit with our programme, we'll consider them. 

So this seems to suggest that Grillo could be willing to offer occasional, case-by-case support in parliament - provided that the proposals on the table are in line with the Five-Star Movement manifesto. That's a very similar to minority government arrangements elsewhere, where individual parties are relied on to push through certain measures.

But even if such a deal between Bersani and Grillo can be struck, it isn't exactly a recipe for (eurozone) stability - not least given some of Grillo's actual economic policies.

We will be over Grillo like a cheap suit, so keep reading our blog and follow us on Twitter @OpenEurope or @LondonerVince for all the latest updates from Italy.

Italian elections: Early projections point to Brussels’ and Berlin’s worst nightmare

Update 18:32: the projections for the Lower House are starting to come in and it'll be a close one. The first RAI projection has Bersani's centre-left coalition on 29.1%, Berlusconi's coalition on 28.6% and Beppe Grillo going even stronger than in the Senate, at 26.3%. Again, the Five Star Movement - the party that has toyed with pretty clear enti-euro rhetoric - is set to become Italy's largest single political party (don't say we didn't warn you). 18 to 24 year olds are allowed to vote in the Lower House elections, whilst 25 is the threshold for the Senate elections, which possibly explains the additional Grillo bounce.

Update 17.50: It's not looking any better. These elections now look like producing a hung senate (though much can still happen). This projection is from La Repubblica:

If this holds, none of the coalition arrangements discussed before the elections will achieve a majority in the Senate. Under this scenario, Berlusconi's centre-right coalition would win 123 seats, Bersani's centre-left coalition 104, Beppe Grillo's Five-Star Movement 58 and Mario Monti's pro-reform bloc only 16.

So there are basically three options: A national unity government (if Bersani, Berlusconi and Monti join forces - could be possible if leading to fresh elections soon afterwards), a sensational Bersani / Grillo coalition (unlikely) or re-run election within 2-3 months. If we have re-run elections, there will be a lot of pressure to change the electoral law beforehand to avoid a similar stalemate to that which could occur now. For that, of course, you need a majority in both houses...

As we've said repeatedly over the last year: this one will be very complicated and uncertain...

------------

The first projections are in. And the results are the stuff of nightmares if you sit in Brussels or Berlin.

Now, the thing to remember is that seats in the Senate are allocated on a regional basis so overall support nationwide doesn’t necessarily translate into a corresponding number of seats. But the projections so far show the following:

• Monti – the darling in Berlin and Brussels – is taking an absolute hammering
• Under the current projections, Berlusconi could prevent a centre-left majority and there could be a hung Senate.
• Italians are coming out in droves to vote against austerity, with Beppe Grillo’s pro-euro referendum, sort-of-anti-euro Five Star Movement being the largest individual political party in half of the projections so far, and third with respect to Coalition arrangements (Grillo won’t join any coalition arrangements)

All eyes are now on the region of Lombardy, which, given the huge number of senators it provides, is likely to be crucial to the fate of these elections.

The vote count for the lower house trails the Senate count.

Can't wait for Italian election results? Here's a timeline

Elections in Italy are always spread over two days. Yesterday, about 55% of Italians cast their vote - marking a sharp 7.4% decline in turnout compared to the first day of the previous general elections in 2008. Turnout was generally much higher in the North than in the South of the country.

Polling stations will close today at 2pm GMT. How long will we have to wait to know the results? Here's an approximate timeline, although a lot will depend on how speedy the counting is (all times are GMT):

2pm: Polling stations close, and the first exit polls are released. Exit polls can give a first idea, but clearly have to be taken with a pinch of salt (they were quite far from the final outcome in the 2006 general elections, for instance). Counting starts shortly after closure, and Senate votes will be counted first.

3pm: First projections for the Senate are expected. These are going to be updated quite often - presumably every hour. The more votes are counted, the more reliable the projections. Have a look at our pre-election briefing to get a clearer idea of why the balance of power in the Italian Senate is key to these elections.

From here on, everything really depends on how quickly/smoothly the counting goes. Each polling station is free to start counting the votes for the lower chamber after all the Senate ballot papers have been counted.  

Around 7-8pm: Counting for the Senate should be over everywhere in the country. Counting for the lower chamber usually takes longer, given that only people aged over 25 are allowed to vote for the Senate - while everyone aged over 18 can vote for the lower chamber.

Around 11pm: It should be possible to get a good idea of the outcome for the lower chamber, although the final results will probably only be announced tomorrow morning.

The website of the Italian Interior Ministry (see here) will update the results real time, as they arrive from polling stations across the country. But to those who don't speak Italian and want the most important info from a variety of sources we recommend following us @OpenEurope or @LondonerVince

Sign of the times? Anti-euro comedian could come second in the Italian elections

This story most certainly caused officials in Brussels and Berlin - at least those who read the Italian press, or alternatively our daily press summary which was the first to break the news in the international sphere - to choke on their morning cappuccino.

Italian daily Il Corriere della Sera reports that, according to some internal opinion polls carried out by centre-left parties, the Five-Star Movement led by anti-euro comedian Beppe Grillo could become the second-largest party following the 24-25 February Italian elections.

It's true that the international media has over-stated Grillo's anti-euro stance - Europe is not one of the Five Star Movement's key pillars. But Grillo is definitely toying with the idea of Italy ditching the euro, and has said Italy should hold a referendum on its membership of the single currency. He has written stuff like this on his blog, for example:

In order to remain in the euro, we are starving the country…If we had the lira, we could solve our debt problem through a devaluation of our currency.

So think about it again: an anti-euro politician may finish second in the Italian elections - Italy arguably being the most pro-EU country of the lot.

And there's an element of panic going on.

In an interview with Le Figaro, Italy’s former Foreign Minister Franco Frattini (who is also a former EU Commissioner) says,

I don't rule out [Grillo’s Five-Star Movement] finishing second…This would be a tragedy comparable to [far-right leader] Geert Wilders' irruption into Dutch politics. One would then need to take into account the failure of the European idea in Italy.

These polls also raise serious questions over whether whether Mario Monti’s centrist bloc will win enough seats to be the kingmaker in the Italian Senate.

As we said: uncertainty still reigns in Italian politics. 

Will German anti-Berlusconi rethoric actually boost Silvio's chances?

Mario Monti has never claimed to be a professional politician. His lack of political experience became evident when he said,

[German Chancellor Angela] Merkel fears the success of left-wing parties [in Italy], especially in an election year for her. I don't think she has any desire to see [Pier Luigi Bersani's] Democratic Party arrive in government.

Merkel's spokesman, Steffen Seibert, quickly shot Monti down.The German Chancellor "has not made comments on the Italian elections. Nor did she do any in the past", he said.

Though it may seem like a minor event, the Italian press was all over it. And it's interesting as it may play straight into Silvio Berlusconi's hands. The man has built his election campaign on strong and uncompromising anti-German austerity rhetoric. He might be minded to ask if Monti cares more about Merkel than Italian voters?

This also illustrates how potentially counterproductive it is for German politicians to wade into the Italian election debate. Merkel may not endorse a candidate, but it is pretty obvious who the Germans don't want to see in power.

German Finance Minister Wolfgang Schäuble told Italian weekly L'Espresso,

I know very well that Silvio Berlusconi is a very effective electoral strategist. However, I'm convinced that Italians are clever enough not to make the mistake of voting for him again.

Another senior member of Merkel's CDU, Ruprecht Polenz, who chairs the Foreign Affairs Committee in the Bundestag, said,

Italy needs leadership for the future. Berlusconi does certainly not represent that.

Foreign Minister Guido Westerwelle did not name Il Cavaliere, but told Süddeutsche Zeitung,

Whoever forms the new [Italian] government, we count on the pro-European course and the necessary reforms to continue.

The more extraordinary since these politicians are all supposed to be Berlusconi's 'fellow' centre-right politicians. Now, the big question is, will this kind of stuff coming out of Germany boost or reduce Berlusconi's chances, given that it fits perfectly within his narrative that Italy is being kicked around by Berlin? Remember when a whole host of Europeans lined up to oppose George W. Bush (not that we compare the two) in 2004, acting as the ideal recruitment sergeants for the Bush campaign...

If you want to know what we think about Berlusconi, the Italian elections and what they mean for the future of the eurozone, check out our new briefing outlining a number of post-election scenarios. And follow us on Twitter @OpenEurope or @LondonerVince for real-time updates from Italy.  

Italian elections: The scandal-watch

Election season means scandal season in Italian politics. Less than two weeks to go to the elections, and a number of scandals are surfacing on the Italian peninsula (not entirely coincidental we think) which could undercut support for the 'establishment' parties in particular - and possible give comedian-cum-politican Beppe Grillo a boost.

Support for the centre-left Democratic Party has been dropping over recent weeks in part due to the big derivatives scandal involving Italian bank Monte dei Paschi di Siena - an institution with historical links with the local government in Siena, in the hands of the centre-left for years.

Two more scandals erupted over the past two days. Raffaele Fitto, a former Italian minister and a top member of Silvio Berlusconi's PdL party, has been sentenced to four years in prison for corruption, illegal financing of political parties and abuse of authority. This is a big blow for Berlusconi and his party, given that Fitto topped the list of PdL candidates in Italy's Southern Apulia region - of which he had previously been the Governor.

Separately, the CEO of Italy's defence giant Finmeccanica, Giuseppe Orsi (see picture), was arrested yesterday over bribery allegations relating to the sale of twelve military helicopters to India. The allegations cover the period from the awarding of the contract in 2010 - when Orsi was the CEO of Agusta Westland, owned by Finmeccanica - until December 2012. The Italian government holds about 30% of Finmeccanica's shares, and the question is whether someone within Mario Monti's cabinet knew what was going on, but failed to take appropriate action.

Orsi is also close to Lega Nord - Silvio Berlusconi's main ally. Last October, Italian daily Il Fatto Quotidiano published the transcript of a phone call between Orsi and Lega Nord leader Roberto Maroni, during which Orsi thanked Maroni for backing his appointment as CEO of Finmeccanica. Maroni has moved swiftly to deny any involvement in the story - and has threatened to sue anyone who claims otherwise. But this might still hurt Lega Nord in terms of votes.

It remains unclear if, and to what extent, these scandals will impact on the final election results. But one thing is clear: the Italian election campaign is heating up. Follow us on Twitter (here and here) for all the news and updates from Italy!