Europe holds its breath as Italy votes

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 on Sunday and Monday that could shape the future of one of Europe’s biggest economies.

Fellow E.U. 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 Mr. 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. Mr. 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. 

While a man of the left, Mr. Bersani has shown himself to have a surprising amount in common with the centre-right Mr. Monti and the two have hinted at the possibility of teaming up in a coalition. Mr. Bersani was Mr. 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 centre-left governments, Mr. Bersani fought hard to free up such areas of the economy as energy, insurance and banking services.

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