Italians vote in crucial election for euro zone


ROME (Reuters) - Italians began voting on Sunday in one of the most closely watched elections in years, with markets nervous about whether it can produce a strong government to pull Italy out of recession and help resolve the euro zone debt crisis.


Some of the first people to cast their ballots expressed fears that no clear winner would emerge, leading to political stalemate and a coalition that may not govern for long.


"I think we will have to go to elections again ... I expect instability for the next two years," said Vincenzo D'Ouria, voting in Milan.


Italians started voting at 8 a.m. (0700 GMT). Polling booths will remain open until 10 p.m. on Sunday and open again between 7 a.m. and 3 p.m. on Monday. Exit polls will come out soon after voting ends and official results are expected by early Tuesday.


The election is being followed closely by financial markets with memories still fresh of the potentially catastrophic debt crisis that brought technocrat Prime Minister Mario Monti to power more than a year ago.


Monti and his wife cast their votes at a polling booth in a Milan school on Sunday morning. His centrist bloc would only enter a future government as a junior partner of a bigger party.


Final polls published two weeks ago showed center-left leader Pier Luigi Bersani with a 5-point lead, but analysts disagree about whether he will be able to form a stable majority that can make the economic reforms Italy needs.


Bersani is now thought to be just a few points ahead of center-right rival Silvio Berlusconi, the four-times prime minister who has promised tax refunds and staged a media blitz in an attempt to win back voters.


A huge final rally by anti-establishment-comedian-turned-politician Beppe Grillo on Friday highlighted public anger at traditional parties.


Grillo's 5-Star movement, made up of political novices, is in third place in its first general election, polls suggest, and popular support from voters across the political spectrum has increased uncertainty about the outcome.


"Italians want change, but you cannot achieve that with Grillo. They are far too inexperienced for the Italian parliamentary machine," said Cristina Rossi, 40, a civil engineer who was on her way to vote for Bersani's Democratic Party in Milan.


"I fear the outcome will be a weak government, but maybe this is just a necessary transition to be able, in one or two years, to chose someone who can really govern Italy."


Italy, the euro zone's third-largest economy, is stuck in deep recession, struggling under a public debt burden second only to Greece's in the 17-member currency bloc and with a public weary of more than a year of austerity policies.


BERLUSCONI CRITICISM


Berlusconi hogged the headlines on Sunday after he used news conference at his soccer club AC Milan's training ground to break the campaign silence imposed on politicians in the day before polls open.


He told reporters that Italy's magistrates were "more dangerous than the Sicilian mafia" and had invented allegations he had held sex parties in order to discredit him.


The 76-year-old billionaire, who is appealing a jail sentence for tax fraud and is on trial accused of having sex with an underage prostitute, was criticized by his rivals for making a political statement during a ban on campaigning.


While the center left is still expected to gain control of the lower house, thanks to rules that guarantee a strong majority to whichever party wins the most votes nationally, a much closer battle will be fought for the Senate, which any government also needs to control to be able to pass laws.


Seats in the upper house are awarded on a region-by-region basis, meaning that support in key areas can decisively influence the overall result.


Pollsters still believe the most likely outcome is a center-left government headed by Bersani and possibly backed by Monti.


But strong campaigning by Berlusconi and the fiery Grillo, have thrown the election wide open. Surveys showed up to 5 million voters will make up their minds at the last minute.


The Interior Ministry urged some 47 million eligible voters in Italy not to let bad weather put them off, and said it was prepared to handle snowy conditions in some northern regions to ensure everyone had a chance to vote.


STAGNANT ECONOMY


Whatever government emerges from the vote will have the task of pulling Italy out of its longest recession for 20 years and reviving an economy largely stagnant for two decades.


The main danger for Italy and the euro zone is a weak government incapable of taking firm action, which would rattle investors and could ignite a new debt crisis.


Monti replaced Berlusconi in November 2011 after Italy came close to Greek-style financial meltdown while the center-right government was embroiled in scandals.


The former European Commissioner launched a tough program of spending cuts, tax hikes and pension reforms which won widespread international backing and helped restore Italy's credibility abroad after the scandals of the Berlusconi era.


Italy's borrowing costs have since fallen sharply after the European Central Bank pledged it was prepared to support countries undertaking reforms by buying unlimited quantities of their bonds on the markets.


But economic austerity has fuelled anger among Italians grappling with rising unemployment and shrinking disposable incomes, encouraging many to turn to Grillo, who has tapped into a national mood of disenchantment.


(Additional reporting by Cristiano Corvino and Lisa Jucca in Milan; Editing by Robin Pomeroy)



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