Who will govern Italy if no government can be formed?
If no government can be formed, the Italian President will have to appoint a temporary, caretaker government to lead the country until the new elections (which is similar to what happened when Berlusconi resigned in November 2011 and Monti took over). That government, too, needs a majority ‘vote of confidence' in both houses of the Italian parliament. Until any new government is formed, Mario Monti remains in charge as caretaker Prime Minister, but will be unable to pass substantial laws.

Would a re-run vote generate a different result?
New elections would be a gamble for everyone. Though far from certain, the protest vote could wear off, particularly if market pressure is turned up and the ‘fear factor' kicks in – this could result in a boost for Monti and Bersani, and a possible majority for the two in the Senate. Alternatively, there could well be an identical outcome – and possibly with a further increase in support for Beppe Grillo. Therefore, there are strong incentives to first, avoid snap elections, and, second, change the electoral law.

57% of Italians voted against austerity and the ‘Brussels consensus'
The election results landed a severe political blow to the eurozone's austerity-for-cash blueprint. Five of the seven main parties campaigned on an anti-austerity ticket. Between them, these parties got almost 57% of the nationwide vote in the lower house. Berlusconi, in particular, received a massive boost in part thanks to strong anti-austerity – at times verging on anti-German – rhetoric. At the same time, Monti – the Brussels and Berlin favourite – got less than 10% of votes in both chambers. This was an almost embarrassing performance.

> The tablebelow has a breakdown of votes by individual parties. Beppe Grillo's Five-Star Movement was the largest party in the lower house, where younger Italians aged 18-24 (who are not eligible to vote in the Senate) can vote.

The Grillo factor
Beppe Grillo's Five Star Movement received over 25% of the vote – exceeding all expectations. Though Berlusconi and Grillo are both populist and anti-austerity, in many ways, they're also each other's antithesis – one representing the old sclerotic system, the other a new, impulsive anti-establishment future. Grillo is clearly a new breed in Italian politics. He has been very critical of Italy's euro membership, and wants a referendum to decide whether the country should leave the single currency. He's also suggested that Italy should consider refusing to pay back at least part of its huge public debt.

What will this mean for eurozone governance?
The result undoubtedly makes eurozone governance more challenging, and could complicate relations between Rome and Berlin in particular. It could be far more difficult to get parliamentary approval in Italy for continued EU-mandated austerity and stronger EU oversight powers of national budgets – something that Germany needs as political cover to press ahead with more fiscal integration.

What will this mean for markets and the Italian economy?
There is no doubt that the results inject fresh uncertainty into the eurozone, with markets again set to jump from headline to headline – as so many times before in the crisis. Whether it's a stalemate, an ineffective grand coalition or new elections, Italy's economic reforms will be put on hold for a significant period of time.

Although Italian borrowing costs have increased in recent days they remain well below 6% and far from their peak last summer. This highlights that the intervention of ECB President Mario Draghi – via the creation of the as yet untapped OMT programme – played a far more significant role in bringing the costs down than the reform programme of interim Italian Prime Minister Mario Monti. However, a fragmented, anti-austerity Italian parliament could also make it far more difficult for the country to tap the ECB's OMT. This is because it would need to access the European Stability Mechanism simultaneously, meaning a series of strict conditions – which Berlusconi and others could resist – and approval from several Northern Eurozone parliaments, including from the Bundestag.

By Vincenzo Scarpetta Openeurope.org.uk

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