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Economy at stake in Italian parliamentary elections

While investors and EU countries watch closely, Italians go to the polls on Sunday and Monday to vote for parliamentary representatives. Those elected could impact how Italy copes with its financial crisis.

By Colleen Barry and Victor L. SimpsonAssociated Press / February 24, 2013

A man casts his vote for the Italian Senate, in Piacenza, Italy, Sunday. Italy votes in a watershed parliamentary election Sunday and Monday that could shape the future of one of Europe's biggest economies.

Marco Vasini/AP

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Will Italy stay the course with painful economic reform? Or fall back into the old habit of profligacy and inertia? These are the stakes as Italy votes in a watershed parliamentary election Sunday and Monday that could shape the future of one of Europe's biggest economies.

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Fellow EU countries and investors are watching closely, as the decisions that Italy makes over the next several months promise to have a profound impact on whether Europe can decisively put out the flames of its financial crisis. Greece's troubles in recent years were enough to spark a series of market panics. With an economy almost 10 times the size of Greece's, Italy is simply too big a country for Europe, and the world, to see fail.

Leading the electoral pack is Pier Luigi Bersani, a former communist who has shown a pragmatic streak in supporting tough economic reforms spearheaded by incumbent Mario Monti. On Bersani's heels is Silvio Berlusconi, the billionaire media mogul seeking an unlikely political comeback after being forced from the premiership by Italy's debt crisis. Monti, while widely credited with saving Italy from financial ruin, is trailing badly as he pays the price for the suffering caused by austerity measures.

Then there's the wild card: comic-turned-politician Beppe Grillo, whose protest movement against the entrenched political class has been drawing tens of thousands to rallies in piazzas across Italy. If his self-styled political "tsunami" sweeps into Parliament with a big chunk of seats, Italy could be in store for a prolonged period of political confusion that would spook the markets.

Voting was generally calm. But when Berlusconi showed up at a Milan polling place to cast his ballot, three women pulled off their sweaters to bare their breasts and display the slogan "Basta Silvio!" (Enough of Silvio) scrawled on their flesh. A cordon of police, already in place for security before the former premier's arrival, blocked Berlusconi's direct view of the women.

Police detained the women for questioning. Italian news reports said the three were members of the Femen protest group. On his way out of the polling station, Berlusconi made no direct comment on the protesters.

While a man of the left, Bersani has shown himself to have a surprising amount in common with the center-right Monti — and the two have hinted at the possibility of teaming up in a coalition. Bersani was Monti's most loyal backer in Parliament during the respected economist's tenure at the head of a technocratic government. And in ministerial posts in previous center-left governments, Bersani fought hard to free up such areas of the economy as energy, insurance and banking services.

But it's uncertain that Monti will be able muster the votes needed to give Bersani's Democratic Party a stable majority in both houses of Parliament.

"Forming a government with a stable parliamentary alliance may prove tricky after elections," said Eoin Ryan, an analyst with IHS Global Insight. "A surge in support for anti-austerity parties is raising chances of an indecisive election result and post-vote political instability."

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