Italian Election 101

Italians are going to vote this weekend to elect a new government. Polls close on Monday at 3:00pm local time or 9:00am EST. Exit polls start coming out soon after that. Final results are made available probably late Monday or early Tuesday. For the market, the best outcome is a clear win by center-left coalition led by Bersani. But given a late surge by populist Grillo, the outcome is anything but certain. Investors do not seem worried. The yield on 10-year Italian government bond has hardly budged in the past week (see the Chart). For political buffs, the key to the Italian PM chair is the Senate seats, and the key regions to watch are Lombardy, Campania, Sicily and Venetto. 

Italian Election 2013
The February 24-25 election is for 630-seat Chamber of Deputies and 315-seat Senate. To form a government, a party or a coalition must have a majority in both chambers, also called perfect bicameralism. 

In Italy, voters do not vote for a candidate but for a party. A citizen must be at least 18 years old to be allowed to vote for the Chamber of Deputies and at least 25 years old to be allowed to vote for the Senate. For a party to secure a seat in the parliament, it must cross a threshold (table). 

Seat Assignment in the Chamber of Deputies
Getting a majority in the 630-seat Chamber of Deputies is easy. The pre-election coalition that wins the largest share of national vote will automatically get 340 seats (54%). Within a coalition, seats are allocated to parties in proportion to their vote shares after they meet the threshold. The losing coalition/party is assigned the remaining seats on proportional basis after they meet the threshold

Seat Assignment in the Senate

Getting a majority in the Senate is more difficult and where all the complication of electoral politics come into play. Italy is divided into 20 regions, each with different number of senate seats based on size and population. In 17 of 20 regions, the pre-election coalition that wins the majority of votes in the region automatically get 55% of seats assigned to that region. So Senate election is the key to forming an Italian government. The key provinces to watch out for are, Lombardy, Campania, Sicily and Venetto. 

There are 6 pre-election coalitions,

1. Center-right coalition led by Silvio Berlusconi

2. Center-left coalition led by Pier Luigi Bersani

3. Centrist coalition led by Mario Monti

4. Left-wing coalition led by Antonio Ingroia

5. Populist party led by Beppe Grillo

6. Libertarian party led by Oscar Giannino

 
References

2013 Italian Parliamentary Election Pre-Election Report

How Italy's election works