* Many obstacles to a Monti return
* Fate of euro zone tied to Italy's stability
* Protest movement on the rise, outrage at austerity
* Genoese comic Grillo second in polls
* Berlusconi adds new confusion
By Barry Moody
ROME, Oct 31 Five months before an election that
will be crucial not just for this country but the whole euro
zone, Italy is mired in some of its greatest political
uncertainty si n ce World War Two.
Nobody knows what electoral system will be used or who the
candidates will be in a parliamentary poll that will be marked
by Italian voter anger over the pain of austerity.
The once-dominant party of billionaire media tycoon Silvio
Berlusconi risks disintegration while the centre-left Democratic
Party (PD), likely winner of the election, is torn by splits
sharpened by a challenge to its leader Pier Luigi Bersani by the
youthful mayor of Florence, Matteo Renzi.
"All election campaigns are marked by uncertainty but this
time ... we do not even know what electoral law will be used,
who will be the party leaders and what will be the coalitions,"
PD official Lapo Pistelli said. "This is something totally new."
Foreign governments and investors want to see a return by
respected, unelected technocrat Prime Minister Mario Monti after
the poll, but the road to such an outcome is beset by big
obstacles which are just as unpredictable as everything else.
Corruption scandals across Italy have fanned disgust with
politicians and rocketed the anti-establishment, anti-Europe
5-Star Movement led by shaggy-haired Genoese comic Beppe Grillo
into second place in opinion polls.
Around half of Italians are undecided about how to vote or
say they will abstain in the poll expected on April 7-8,
thickening a fog of chronic confusion.
While most concern about the euro zone currently focuses on
Spain and Greece, Italy - the bloc's third largest economy - is
not far behind.
Italy would race to the forefront if deeper chaos emerges
from the election, as looks possible, spooking investors and
pushing Rome's borrowing costs to dangerously high levels.
Many are comparing the atmosphere now to 20 years ago when
the "Clean Hands" corruption investigation overturned the entire
system and destroyed the dominant Christian Democrat party.
Berlusconi, 76, who was replaced by Monti last November when
Italy tottered close to a Greece-style meltdown, added to the
chaos at the weekend when he threatened to pull the plug on his
successor, who depends on a broad cross-party alliance.
Although Angelino Alfano, secretary of Berlusconi's People
of Liberty (PDL) party, quickly disowned this threat, the
scandal-plagued magnate's outburst after a conviction for tax
fraud added to the fevered atmosphere ahead of the vote.
If the results of a Sicily regional election last weekend
are anything to go by, politicians are right to be worried.
Grillo's candidate took most votes, although a left-centrist
alliance robbed him of the governorship.
More than 50 percent of voters abstained.
"The 5-Star Movement could become the biggest party in
Italy," said Roberto Weber, chairman of SWG polling institute as
Italy reflects a trend across Europe of disillusionment with
conventional political parties.
The PDL, which swept every seat in Sicily a decade ago when
Berlusconi was in his heyday, won less than 13 percent, hit
particularly badly by abstentions.
But 40 percent of Grillo's votes came from former
centre-left supporters, SWG said, and senior PD official
Pistelli told Reuters they were worried by the comic's success
and by the steep decline of the PDL as the other main
No single government out of the more than 60 since World War
Two has lasted a full five-year term but politicians, academics
and diplomats say they cannot recall a similar confluence of
economic and political crisis.
Angry Italians, like other southern Europeans, are suffering
badly in a deep recession worsened by Monti's debt-cutting
"The economy is by far the dominant issue. After years of
crisis, 2012 was even worse and households are starting to feel
the pinch with more and more people out of work," said SWG vice
president Maurizio Pessato.
"I do not believe there has ever been such a dramatic
combination of institutional confusion and economic crisis for
Italian families," said a parliamentarian close to Berlusconi
who asked not to be named. "This cocktail is really explosive."
Monti is not standing as a candidate in the election, which
would make it very difficult for him to become prime minister
under the existing electoral law, and there is strong opposition
to the idea both from the public and inside the centre-left PD.
A return to the unelected Monti after a fierce election
campaign could fuel charges that democracy in Italy has been
suspended and make parties look irrelevant. In fact the most
likely scenario for him to return would be total deadlock, which
itself could presage instability and a short-lived government.
In another piece of the jigsaw, President Giorgio
Napolitano's term ends after the election. Napolitano has
boosted the loosely defined powers of his office, including
engineering Monti's replacement of Berlusconi last year.
Monti, an economist who took on U.S. corporate titans as
European Competition Commissioner, may be more likely to replace
Napolitano, a position in which he could sustain the prestige he
has built abroad and push the government to press on with his
Monti, 69, is the sober antithesis of Berlusconi and his
decisive presence has itself dealt a shock to the political
system. In Brussels, he was known as "The Italian Prussian" for
his hard-nosed negotiating style.
"He seemed like an extra terrestrial when he arrived (as
premier)," centre-left politician Bruno Tabacci said.
Monti has raised taxes, cut spending and carried out a
radical pension reform to cut Italy's huge debt. But many of his
measures have been diluted in parliament and he has had little
success in boosting growth. Unemployment has hit nearly 11
percent, the highest point since monthly records began in 2004.
Even for a country that has often been a byword for
instability, the situation is extraordinary.
A low turnout would make it hard for the poll's winner to
establish the authority to administer further bitter economic
medicine to an angry population. The PD currently leads opinion
polls with about 25 percent but that could amount to only around
13 percent of the more than 40 million voters.
"In difficult times when you have to ask for sacrifices,
this is a problem ... I honestly would not want to be in
anybody's shoes asking for huge reforms with an electoral base
that is pretty slim," Filippo Andreatta, a political science
professor at Bologna University, told Reuters.
Even if Monti did return, a new grand coalition backing him
seems unlikely after a bitter election campaign. Monti's ability
to pass decisive reforms would be more limited with the losers
and Grillo sniping at a political, not technocrat, government.
The centre-right PDL is racked by infighting between
moderates led by Alfano and hardline, anti-Europe Berlusconi
acolytes including a group of women known as the "Amazons".
Berlusconi, once regarded as an electoral magician, is now
seen by many in his party as a liability. He faces judgment soon
in a trial for having sex with an underage prostitute.
Key to what will happen is an electoral law scathingly known
as "the pigsty" that enables party leaders to handpick members
of parliament. The law guarantees a strong majority to the
winning coalition, however small their vote.
"It is a law that stinks in the noses of Italians,"
prominent commentator, Sergio Romano, told Reuters. President
Napolitano is pushing hard for a change in the law and
politicians have vowed for months to do so.
But there are suspicions many of them, including Berlusconi,
may really want to keep the law to keep the power of patronage.
If the law remains, the centre-left is expected to win with
a strong majority and would see no need to restore Monti - in
fact this could be seen by the electorate as cheating voters.
If the law is changed under a model being discussed with a
lower winner's premium, projections show a hung parliament or a
small majority led by Bersani. Monti may not be interested in
leading a weak government with a short life expectancy, whose
room for manoeuvre would be severely limited.
"I think it would be very difficult for Monti to be
available in these circumstances ... his life would be much more
difficult," PD member Salvatore Vassallo told Reuters.
The most likely scenario for many is that Bersani either
forms a strong government after an election held under the
current law or if it is changed goes for an alliance with
centrists in order to govern, perhaps ceding the premiership to
centrist leader Pier Ferdinando Casini's nominee.
Either way, Bersani is likely to push Monti towards the
splendour of Rome's Quirinal presidential palace, which has
housed popes, kings as well as presidents. "Whatever happens, we
must keep Monti close," said the centre-left's Tabacci.