Oh Italia!

Headlines in Italy say it all: INGOVERNIBILITA, NERVOSISMO, MIRACOLO BERLUSCONI.

The actual count puts the Center left coalition slightly ahead in the lower house, which by law awards them 54% of the vote. In the upper house, the representation is awarded on a regional basis and the center left has only a very narrow win. What does this mean?

Lets start by stating that technically, the center left could form a government based on just numbers if the coalition held together. Based on past experience, such governments do not last long.

A broader coalition? Who and how? Mario Monti's party got shellacked with 10% of the vote, besides, Monti is the architect of Italian austerity and center left wants to loosen the austerity. Beppo is more of a comic than politician and his platform is that the people should send everyone home and elect his bunch. Berlusconi? Center left is not keen on the idea and the Italian Media wants a Center left, not a Center Right.

Where does this leave Italy? Everyone is having meetings to figure things out. Then they will proceed to bargaining. And then they will cobble together a government. When? Two weeks is the best guess.

What about the future direction of Italy? The outcome is uncertain. There is a good chance that a weak coalition might be formed that will endure for a time. Such a coalition would want to reduce the austerity, which would increase the deficit. (At the very least, Italian bond rates now will increase at least for a while.) Such a coalition would be hard to form and even harder to maintain; hence the ingovernibilita. Will this take Italy out of the Euro sphere? That's the NERVOSISMO.