The painful ways out of the Italian maze.

Italy faces difficult choices over the next few weeks and a tough reality for the next six months or more.

In two weeks time the new Parliament will assemble and will elect its new officers so there is already jostling over who should have the prestige and power of the speakers’ jobs. Formal negotiations for the new government won’t start till then but the informal bargaining has already begun with the leaders marking territory and putting out feelers.

Italy has “perfect bicameralism”, the two houses have equal power. In the lower house, the Chamber of Deputies, the electoral system gives a majority premium to the overall winner, in this case, Pierluigi Bersani and the Democratic Party (PD) led coalition but in the Senate there is no majority. So in order to govern, even temporarily, Bersani will have to come a deal with either Silvio Berlusconi’s centre-right coalition of the People of Freedom (PdL), Northern League (LN) and right wing Fratelli d’Italia, or Beppe Grillo’s Five Star Movement (M5S). The fourth player in the Senate, Mario Monti could easily reach a deal with Bersani but even together, they would not have a majority.

To achieve a majority, there are three alternatives, one difficult and two almost impossible.

A grand coalition of Bersani, Monti and Berlusconi would have the numbers and indeed was just the combination that governed Italy from November 2011 until now. But even then it was clearly an unstable and temporary alliance and the bruising electoral campaign combined with serious personal and ideological divisions mean that a repeat performance is highly unlikely. Above all, Bersani’s policies are likely to clash with Berlusconi’s agenda. Bersani has promised a serious conflict on interest law and a revision of last year’s toothless anti-corruption law. He would also maintain much of Monti’s austerity package. Berlusconi would be unhappy with all of these measures even though has been making some overtures towards Bersani, they are more for show than substance.

All the leaders are trying hard at the moment to seem “reasonable” and “open to compromise” because none of them wants to be seen to be responsible for preventing the formation of a government and the likely fiscal chaos that would follow.

The second unlikely scenario is minority government which lasts. Bersani could probably persuade the centre-right or Grillo to abstain at the vote of confidence (Grillo has said explicitly that he will give a confidence vote to anyone) and so allow him to form a government but then he would have to navigate between the two of them in order to pass each and every measure. The only hope that such a fragile arrangement might last is if the external pressures from the markets, the EU and th ECB are enough to dissuade Grillo or Berlusconi from bringing the government down.

The most likely outcome of the next month’s negotiations is a Bersani or possibly semi-political/semi-technocrat prime minister like Giuliano Amato governnment with a check list of measures and a date stamp on it. Amato did something similar 20 years ago in Italy’s last institutional crisis. He was a Socialist then and is still part of the broad left but has not been in party politics for years so has a faint aura of impartiality.

Whoever leads this hypothetical government would have to draw up a list of tasks starting with the election of the new President of the Republic and moving on to election reform, parliamentary reform and other measures which Grillo might support like conflict of interests, corruption and cutting the costs of politics.

Bersani has already started making overtures to Grillo both on the measures they might work on together and on positions. There has been a suggestion that a grillino might become speaker of the Chamber, even that it might be Marta Grande 25, the youngest deputy. There are echoes of the last wave of a new populist movement hitting Parliament. In 1994, the Northern League won 117 in the Chamber and 60 in the Senate (Grillo has 108 deputies and 54 senators) and the 31 year old Leghista Irene Pivetti became speaker.

Agreement on some reforms is not impossible and Grillo has already lowered his volume from his previous deafening mass rally levels to a calmer political comuniqué level. He has said that he will represent the Five Star Movement in the government formation negotiations that President Napolitano will manage as soon as the new parliamentarians have taken their seats. This means he is moving from rabble-rousing mode towards a pragmatic politician stance. He’s certainly not there yet but it’s a change.

The first deadline is the election of Napolitano’s successor a process which must start 30 days before the end of his mandate or 15 April. Both houses come together with representatives of the regional governments to elect the president, about a 1,000 people. For the first three ballots, a two thirds majority is necessary which in theory could come from Bersani, Monti and Grillo; not very likely. From the fourth ballot, a simple majority is enough Monti and Bersani. But the future president is very much part of the negotiation process.

Grillo could agree with Bersani to change the electoral law but it would not be easy to decide on what sort of reform. The other reforms, conflict of interest, corruption and cutting political costs are much more controversial and so more likely to be blocked by a Berlusconi opposition.

This means that the new government is likely to have a very short life, not much more than electing a new president whose first job would be to dissolve parliament and go back to the polls. At the earliest this could happen in July but much more likely in the Autumn or perhaps Spring 2014 given Italy’s tradition of spring elections and the inevitable inertia in parliament. The longer the uncertainty goes on, the more likely is some sort of debt crisis which will inevitably colour the next campaign. This time the possibility of having to take up the EU/ECB/ESM bailout package is much more likely.

The result of new elections will probably not repeat this week’s results as all the leaders will try to make up for their shortcomings in the last campaign. For better or worse, Berlusconi will have most of his pending court cases settled; Bersani will be flanked or replaced by Matteo Renzi the young mayor of Florence who wants a Blairite renewal of the party; Grillo will have had a short spell in or close to power and Monti will have to decide whether to carry on in politics.

It will be a bumpy ride for all of them and the rest of Italy.

A slightly modified version of this was published by the BBC Bumpy ride ahead for Italy after indecisive election