Election splits nation

Italy's election was too close to call yesterday, with Prime Minister Silvio Berlusconi and his rival Romano Prodi neck-and-neck in a race that has split the nation and raised the spectre of chronic political instability.

Some 10 hours after voting stations closed, centre-left leader Romano Prodi said he still did not know the outcome of Italy's election, but said he remained hopeful of victory.

Addressing cheering supporters, Mr Prodi said he did not understand why the full results were not yet available.

With most votes counted, Italy's centre-right and centre-left blocs were virtually even, and a leading pollster following the race declined to declare a winner in either of the two houses of Parliament.

Earlier, one pollster said partial results indicated Mr Berlusconi would win by a fraction in both houses of Parliament, while another forecast the narrowest of victories for Mr Prodi and his centre-left alliance.

Exit polls had originally predicted a clear win for Mr Prodi, and his allies reacted with dismay and disbelief as the centre-right coalition closed the gap.

"The scenario right now is that either we win by a narrow margin or they win by a narrow margin," said Fabrizio Cicchitto, coordinator of Berlusconi's Forza Italia (Go Italy) party.

"With such a tight balance of power it will certainly be difficult to govern... (Fresh elections) are one of the possibilities, but we can't decide this now," he said.

Under Italy's controversial new electoral system, rushed into law late last year, the winning bloc will automatically be granted 340 of the 630 seats in the lower house of Parliament no matter how small its eventual margin of victory.

However, the counting system is different for the 315-seat Senate and pollsters predicted that the eventual winner might just have a one-seat majority, leaving it highly vulnerable.

Analysts said a hung Parliament might also emerge. Italy's two houses of Parliament duplicate each other's functions and a government needs the support of both to take office and then to pass laws.

"Different majorities in the Senate and the Chamber of Deputies, as now looks possible, would be the worst possible scenario for markets," said Luigi Speranza, economist at bank BNP Paribas.

The interior ministry said turnout at the election was a high 83.6 per cent against 81.4 per cent in 2001. Mr Berlusconi had argued that a turnout above 82 per cent would help his coalition.

In a hint of possible trouble ahead, Mr Prodi's main allies questioned why it was taking so long to complete the official count, demanded answers from the Interior Ministry and ordered their parliamentarians to follow the count in key regions.

"We are worried... by the dancing figures and ongoing discrepancies in the data that is being supplied to us," the centre-left said in a statement.

Mr Berlusconi, Italy's richest man who created the country's biggest media empire, dominated the often ill-tempered campaign with a serious of fierce outbursts against his opponents.

But he upstaged Mr Prodi in the final week of electioneering with a last-minute promise to abolish unpopular property taxes.

Mr Prodi's centre-left alliance, which stretches from Roman Catholic centrists to communists, had led in opinion polls for the past two years, benefiting from widespread voter discontent over the stagnant economy and rising cost of living.

It dismissed Mr Berlusconi's tax cut pledge and said Italy needed a new government to sort out the country's economic woes.

The Italian economy has grown on average just 0.6 per cent a year since Mr Berlusconi took office in 2001, its debt has risen to 106.4 per cent of gross domestic product (GDP) and its trade deficit hit a record high last year.

Centre-left supporters gathered in front of Mr Prodi's headquarters in an elegant Rome square yesterday afternoon expecting to celebrate an easy victory, but the smiles soon faded as new results flashed up on big television screens.

Just round the corner in the cobbled streets near the Trevi fountain, another group was experiencing opposite emotions at the headquarters of Forza Italia.