Rome, Feb 24: 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.
But it's uncertain that Mr. Monti will be able muster the votes needed to give Mr. Bersani's Democratic Party a stable majority in both houses of Parliament.
Another factor is turnout. Usually some 80 per cent of the 50 million eligible voters go to the polls but experts are predicting many will stay away in anger, hurting mainstream parties.
When Mr. Berlusconi stepped down in November 2011, newspapers were writing his political obituary.
At 76, blamed for mismanaging the economy and disgraced by criminal allegations of sex with an underage prostitute, the billionaire media baron appeared finished as a political force.
But Mr. Berlusconi has proven time and again over 20 years at the centre of Italian politics that he should never be counted out.
The campaign strategy that has allowed him to become a contender in these elections is a simple one- please the masses by throwing around cash.
Mr. Berlusconi has promised to give back an unpopular property tax imposed by Mr. Monti as part of austerity measures. Even his purchase of start striker Mario Balotelli for his AC Milan soccer team was widely seen as a ploy to buy votes.
Berlusconi has also appealed to Italy's right-wing by praising Italy's former fascist dictator Benito Mussolini during a ceremony commemorating Holocaust victims.
The most recent polls show Mr. Bersani in the lead with 33 per cent of the vote, against 28 per cent for Mr. Berlusconi's coalition with the populist Northern League.
Mr. Grillo's 5 Star movement was in a surprise third place, with 17 per cent support, while Mr. Monti's centrist coalition was notching 13 per cent. The COESIS poll of 6,212 respondents had a margin of error of plus or minus 1.2 per cent.
Pollster Renato Mannheimer said among his biggest clients heading into the elections were foreign banks seeking to gauge whether to hold or sell Italian bonds.
“They are worried mostly about the return of Berlusconi,” Mr. Mannheimer said.
Uncertainty over the outcome of the vote has pushed the Milan stock exchange down in the days running up to the vote and bumped up borrowing costs, as investors express concern that Italy may back down from a reform course to pull the country out of recession.
Mr. Mannheimer said many undecided voters who comprise around one-third of the total electorate identify with the centre-right, and that may help Mr. Berlusconi.
He said that the undecided vote may also tilt heavily toward Mr. Grillo's protest movement.
The professorial Mr. Monti looked uncomfortable at first as a candidate but has recently warmed to the role. Like the others, he has not shied away from name calling, warning that Mr. Berlusconi is a “charlatan” and saying his return would be “horrific”.
Bond analyst Nicholas Spiro said the election “will deliver the most important verdict on the eurozone's three-year-old austerity focused policies”.
But he is betting on a period of political instability after the vote.
“An upset victory by Mr. Berlusconi may be markets' nightmare scenario,” he said, “but the prospects for a stable and harmonious Bersani-Monti coalition government still the mostly likely outcome in our view are bleak.”