ROME - Italy's centre-left was poised to beat Silvio Berlusconi on Monday but might fail to win the upper house and require a coalition in a nail-biting finish to key elections in which a new anti-austerity party is also set to make inroads.
The newcomer Five Star Movement led by former comedian turned activist Beppe Grillo, who has stirred public anger at politicians and budget cuts, looked set to come in third with around 20 percent. Outgoing prime minister Mario Monti, who has won praise in Europe for his 18 months in government but has been increasingly criticised at home for his austerity programme, was at around 10 percent.
The exit polls also showed that right and left were neck and neck in the battleground Lombardy region, which could determine who ends up controlling the Senate, parliament's upper house. National projections based on a sample of preliminary results showed Berlusconi's coalition ahead although early results coming in from different polling stations showed the opposite, indicating a close contest. In the Senate vote, with nearly half of ballots counted, Bersani was seen ahead with 32.9 percent against 29.2 for Berlusconi, 24.0 percent for Grillo and 9.2 percent for Monti.
"Whatever the result, the Democratic Party and the centre-left coalition maintain their pledge of open government to put an end to the era of the right," candidate Davide Zoggia said at the party's election base in Rome where hundreds of supporters waited anxiously as early results trickled in.
Daniele Capezzone, a spokesman for Berlusconi's People of Freedom party at its headquarters in Rome, called early indications "ultra-positive".
Failure to win a majority in the Senate could force Bersani to ally with Monti, which analysts warn might prove unstable given differences over economic policy. A percentage deficit in the Senate would not automatically mean the left will fail to win a majority there, however, because of complex electoral laws that are decided based on results in individual regions.
European capitals and the financial markets have been worried that no clear winner will emerge, bringing fresh instability to the eurozone's third largest economy after Germany and France.
"A stalemate between the two houses of parliament would add a noisy element of instability to the political mix," Berenberg bank analysts said in a note to investors.
Italy has been plagued by a chronically unstable political landscape for decades, and there have been fears too of a return to lax public finances.
The wild card in the election has been Grillo, who has called for Italy's debts to be cancelled and for a referendum on whether to stay in the euro.
He spoke to packed city squares during the campaign, channelling the frustration of Italians enduring their longest recession in two decades.
Critics have said his party's candidates are too inexperienced, while supporters say they could bring a much-needed breath of fresh air.
Investors hailed the first signs that the left had won handily, with stocks in Milan jumping by more than 3.5 percent after the exit polls.
The rally slowed however and stocks went into negative territory after it became clear that the race might be too close to call in the Senate.
Stocks finally closed up just 0.73 percent.
The differential between Italian and German 10-year government bonds rose to 293 basis points on Monday from about 255 points before polls closed, indicating market jitters. A lacklustre turnout compared with previous votes also reflected widespread frustration among voters fed up with austerity cuts and grinding recession.
Turnout was around 75 percent - five percentage points lower than in 2008.
Bersani, 61, says he is the best man to promote a growth agenda for Europe and "turn the page" after Berlusconi.
The former communist has said he will abide by the budget discipline enforced by Monti, a former Eurocrat roped in after Berlusconi's ouster at the height of Europe's financial crisis in 2011.
But Bersani will face pressure from trade unions and many ordinary Italians who have seen unemployment rise to record highs.
The down-to-earth Bersani, the son of a car mechanic, has tried to overcome his image as a party apparatchik and has surrounded himself with a youthful team with many women in the ranks.
Bersani's arch-rival Berlusconi has waged a populist campaign, blaming Germany for Italy's economic woes and promising to refund an unpopular property tax to Italians - out of his own pocket if needed.
The 76-year-old media tycoon, who was mobbed by three topless feminists in a protest as he cast his ballot on Sunday, is a defendant in two trials - for tax fraud and for allegedly having sex with an underage prostitute.
He is also the only post-war prime minister to have served out a full term of five years. The Milan native has been prime minister three times in 20 years.
"We're living a tragi-comic moment, with lots of fantastical promises, and I don't think whoever wins will have a stable majority," said Luciano Pallagroni, 77, as he voted in Rome.