Italy's political system encourages the forming of alliances, and a broad coalition between Bersani and Berlusconi could still emerge, although many would doubt its stability after Berlusconi withdrew from a similar pact last year, triggering Monti's resignation as prime minister.

If voters delivered one message, it is that they are largely opposed to austerity policies, exposing the country to questions about its commitment to fiscal consolidation.

Markets had hoped Italian voters would give Bersani a clear mandate to pursue the reforms started by Monti, possibly including the economics professor's party in a coalition.

The scale of the challenge awaiting the next government should not be underestimated, and any coalition could face opposition from within its own ranks to more radical structural reforms.

"Elections are more problematic than market scares or sentiment shifts as they can't be undone by printing money," Steven Englander, a currency strategist at CIti, wrote in a research note.

Italy's economy has stagnated for years, and suffered the biggest contraction of any G7 nation in 2012 -- it shrank by 2.2%. Last week, the European Commission said it would contract by a further 1% this year, double the rate it had previously forecast.

At the same time, Italy has to service debts of two trillion euros, the eurozone's second biggest debt mountain -- relative to the size of the economy -- after Greece. That costs some 5% of gross domestic product -- or about 100 billion euros --- each year and as the economy shrinks, the government has to retain an ever greater share of national income to pay for it.

Unemployment will rise to 11.6% in 2013, according to the European Commission, and then 12% next year.