Results in crucial elections in Italy show no clear winner, raising the possibility of a political crisis in the debt-laden country.
The uncertainty prompted big falls on world markets with the Italian MIB plunging 5% on opening while the FTSE 100 in London lost 1.4%, the DAX in Germany was 2.1% down, the Spanish IBEX was 3.4% lower and the CAC in Paris also bled value of more than 2.5%.
Banking stocks were particularly badly hit though some of the damage was erased after the initial plunge in prices.
Grillo: his protest group M5S appears the real winner The market reaction underlines concern about how the election result does not help the efforts of the eurozone's third largest economy to pass the tough reforms it needs to heal its economic woes and prevent a new round of global financial turmoil.
In the lower chamber of parliament, the Democratic Party leader Pier Luigi Bersani and his leftist coalition scraped a razor-thin victory over Silvio Berlusconi's centre-right, winning by 29.55% to 29.18% with 99.9% of the ballots counted.
Bersani: narrow victory for his leftist coalition in the lower chamber But in the 305-seat Senate, preliminary results from the interior ministry showed that the coalition led by former Prime Minister Mr Berlusconi could win 110 seats to the left's 97 seats, with neither group winning a majority, which is required in both chambers of parliament to form a government.
This leaves Italy in a state of limbo with a hung parliament that is unprecedented in its post-war history.
"It is clear to everyone that this is a very delicate situation for the country," Mr Luigi Bersani said.
Mr Berlusconi indicated he was open to an alliance between his centre-right coalition and the centre-left group: " Italy cannot be left ungoverned, we have to reflect," he commented.
He described the market reaction as "a bit crazy" and said that all sides had to "sacrifice something" if the impasse was to be broken.
The deadlock can be explained by a huge protest vote for the new Five Star Movement (M5S), led by former comedian-turned activist Beppe Grillo, who stirred anger at politicians and budget cuts and became the country's third political force as a result, creating dozens of new lawmakers.
Berlusconi: doing better in the Senate Comparing single parties without coalitions, the M5S is now the biggest party in the lower house with 25.55% to the Democratic Party's 25.41% - a shock success that analysts predicted would reverberate around an austerity-weary Europe.
"This is fantastic! We will be an extraordinary force!" Mr Grillo said on his website, warning mainstream politicians they would "only last a few more months".
"We'll have 110 people in parliament and we'll be millions outside."
Some Democratic Party officials suggested fresh elections may have to be held within a few months after a reform of Italy's complex electoral laws. Others said some form of agreement could be found with the anti-austerity Five Star Movement.
Political analysts suggested a possible return to the grand coalition agreement between right and left seen over the past 18 months, or even dissolving the Senate alone to hold fresh elections for only one chamber of parliament.
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