While Pier Luigi Bersani's center-left bloc has taken enough votes to give it control of the lower house of parliament, no party or likely coalition won enough seats to gain a majority in Italy's upper house, which implies a hung parliament at a time when the country urgently needs to fight a deep recession, high unemployment and a huge public debt.
Fears that uncertainty in Italy could spark a fresh euro zone crisis rattled global markets on Tuesday. This follows months of calm and increased confidence in the outlook for Europe that have helped underpin risk appetite – the euro rose above $1.37 earlier this month, its highest level in over a year.
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"We're now left in limbo and we don't know what the election result means for the reform agenda and the policies Italy needs to implement. It's not a helpful outcome at all," Paul Bloxham, chief economist for Australia at HSBC told CNBC Asia's "Squawk Box" on Tuesday. "Europe is back in the foreground and is likely to be there for a while."
The euro has been one of the best performing major currencies in recent months. It has climbed about 9 percent from a low of $1.2050 hit in July last year amid a debt crisis in Spain.
A pledge, however, by European Central Bank President Mario Draghi in July to do "whatever it takes" to prevent the euro zone from collapse reassured markets and put the currency on an upward path against the greenback.