Italian elections end on inconclusive note

The Italian elections renewed market uncertainty over Europe's debt crisis as recession-weary voters rejected budget rigour and established former comedian Beppe Grillo as a political force.

The four-cornered elections saw pre-election favourite Pier Luigi Bersani win the lower house by less than a half a point, while former premier Silvio Berlusconi, embroiled in a tax-fraud conviction and charges of paying a minor for sex, called for a recount after winning a blocking minority in the Senate.

In its first national contest, Grillo's group came up with over 25 per cent support.

According to Alberto Gallo, head of European macro credit research at Royal Bank of Scotland Group Plc, the political situation across Europe was effectively a race between austerity and reforms on the one hand and the rise of populist sentiments on the other.

He said austerity was painful, and if reforms were not implemented in time, there was a risk of social unrest and populism. He added, it had not happened so far in Greece, it had not happened in Portugal or Spain, but Italy was very close to it.

Between them, Berlusconi and Grillo, the candidates opposed to the  austerity measures introduced by incumbent premier Mario Monti to contain the region's financial crisis, received around 55 per cent of the popular vote. The euro declined to a six-week low, Italian bonds retreated while US Treasury notes were up with the  results trickling in.