Funny stuff, politics ... French actor Coluche making faces next to Italian actor Beppe Grillo (R) during the 38th International Cannes Film Festival. Photo: AFP
ITALY headed for gridlock and financial markets tumbled as a stalemate developed in parliament between the right and left after critical elections in which the real winner might be a new protest party calling for a referendum on the euro.
The Democratic Party leader, Pier Luigi Bersani, and his leftist coalition scraped a razor-thin victory in the lower chamber of parliament. They won just 29.55 per cent to 29.18 per cent for Silvio Berlusconi, with 99.9 per cent of the ballots counted.
The victor's bonus will give the left a handy majority in the lower house, the Chamber of Deputies.
Poll time ... Grillo and his wife arrive to cast their votes at the polling station in Genoa. Photo: Reuters
But in the 305-seat Senate, preliminary results from the Interior Ministry showed Mr Berlusconi's coalition could win 110 seats to the left's 97 seats, with neither group winning a majority.
A majority in both chambers of parliament is required to form a government, leaving Italy in a state of limbo with a hung parliament that is unprecedented in its postwar history. ''It is clear to everyone that this is a very delicate situation for the country,'' Mr Bersani said late on Monday.
US stocks closed sharply lower, with the Dow Jones Industrial Average down 1.55 per cent on the news. Stocks in Tokyo opened 1.83 per cent lower.
''Political uncertainty has returned,'' SMBC Nikko Securities' general manager of equities, Hiroichi Nishi, said at the start of trading on Tuesday.
The Five Star Movement, led by the comedian-turned-activist Beppe Grillo, became Italy's third political force, creating dozens of new MPs.
Mr Grillo's movement is calling for a referendum on the euro and a 20-hour working week, as well as a raft of environmental and social rights demands.
Comparing single parties without coalitions, the M5S is now the biggest party in the lower house, with 25.55 per cent to the Democratic Party's 25.41 per cent - a shock success that analysts predicted would reverberate around an austerity-weary Europe.
''This is fantastic. We will be an extraordinary force.'' Mr Grillo said, warning mainstream politicians they would ''only last a few more months''. ''We'll have 110 people in parliament and we'll be millions outside.''
Supporters of the party celebrated the early poll results.
In Mr Grillo's home town of Genoa in north-west Italy on Monday, the beer flowed at a bar where candidates and activists crowded in to cheer the election tallies. Dozens of mostly young candidates - some close to the minimum age of 25 and many with little or no political experience - are set to enter parliament for the first time as Italians fed up with austerity and corruption flocked to their ranks.
However, the euphoria was not shared across the country or across borders. European capitals fear the lack of a clear winner in Italy could bring fresh instability to the eurozone's third-largest economy, and plunge it back into the debt crisis.
Some Democratic Party officials suggested fresh elections may have to be held within a few months after a reform of Italy's complex electoral laws. Others said some form of agreement could be found with the anti-austerity Five Star Movement.
Political analysts suggested a possible return to the grand coalition agreement between right and left seen under Mario Monti over the past 18 months - or even dissolving the Senate alone to hold fresh elections for only one chamber of parliament.