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By Barry Moody
ROME, Feb 28 (Reuters) - Italy's electoral earthquake seems to have condemned the country to the thing it needs least - a short-term government and new elections in as little as six months or a year.
A huge protest vote in the Feb 24-25 election produced the worst possible result for Italy's stagnant and recession-hit economy - a parliament in which no single group has a workable majority and populist leader Beppe Grillo has the whip hand.
Global markets plunged immediately after the election before calming on Wednesday. But there are deep concerns that sustained instability in the euro zone's third largest economy could reignite Europe's debt crisis.
Italy has a long history through decades of instability of finding a way out of apparently intractable political stalemate but there appear to be only two options this time and neither of them looks very easy.
The first is a government led by centre-left leader Pier Luigi Bersani, who has a majority in the lower house but not the Senate, and backed by Grillo's 5-Star Movement.
The second is an alliance between Bersani and those on the opposite side of the political spectrum, the centre-right of Silvio Berlusconi, who staged an astonishing fightback to recover from scandal and humiliation and come within a whisker of beating the centre-left in the election.
However, Grillo has dismissed the first option and there is great opposition among the centre-left rank and file to any alliance with Berlusconi, who often dismisses Bersani's supporters as communists.
Berlusconi, a 76-year-old billionaire media magnate, has been uncharacteristically quiet since the election, but appears to favour a pact with Bersani to stay in the game. Bersani's leftist ally, Nichi Vendola, has brusquely ruled such a "grand coalition" out of court.
"Over both scenarios hangs a shadow of inescapable uncertainty," said respected commentator Massimo Franco.
Grillo said on Wednesday he would not support a vote of confidence in any government.
He appears to want the right and left to discredit themselves further in an ineffective and fractious joint government - their only option without his support - before a new election in which he will score an even bigger victory. He expects it to take no more than a year for such a government to fall.
To make things worse there will be a constitutional vacuum until after March 15, which is the earliest date that President Giorgio Napolitano, the head of state, can start consultations with the politicians aimed at finding a government.
Napolitano himself leaves office in mid-May, adding to the uncertainty that has seen Italians faced by political deadlock and the shock resignation of Pope Benedict all at the same time.
With a sophisticated campaign on the Internet and in a tour of Italy in which he shouted himself hoarse insulting the politicians, Grillo scored one of the biggest ever victories for a populist party anywhere, taking 25 percent of the vote.
Grillo's tactics may be astute.
Maurizio Pessato, vice-president of the SWG polling firm, told Reuters that as many people agreed with Grillo's denunciations of a tired political class but did not vote for him as those that did in this week's election.
That gives him a potential voting poll of 50 percent of the electorate, according to Pessato.
"We could say half the country agrees with him," he said.
Before the vote, many analysts had warned Italy's politicians that rage with their waste and corruption threatened a political revolution, but few took much notice.
Now they are fighting for survival with both centre-left and centre-right facing internal splits that could blow them apart.
"They really must change their leadership or offer answers or they will be swept away," Pessato said.
There are, however, a few glimmers of hope for at least a temporary solution to the crisis, not least that early declarations by politicians may be negotiating ploys.
Grillo's stream of insults against Bersani's cautious overtures towards the 5-Star Movement did not go down well with many of the group's supporters, who often seem more moderate than their outspoken leader.
An online petition supporting a vote of confidence in a centre-left government committed to changing Italy has collected more than 100,000 signatures in the last 24 hours - apparently with support from many of those who supported Grillo's campaign.
Bersani has proposed a list of reforms as the programme for a new government, many of which coincide with the 5-Star Movement's aims.
They include repealing the hated electoral law which has been a major contributor to the crisis, a sharp reduction in the number of parliamentarians and their extravagant privileges, and a powerful new law against corruption.
Another possible source of hope is the fact that Grillo has praised the system in Sicily, where a centre-left government is successfully supported by the 5-Star Movement. However, in the island's regional administration there is no need for the vote of confidence that is essential for a national government.
END OF AN ERA
Senior centre-left official and former premier Massimo D'Alema said on Thursday the election, "marked the end of an era". "But," he added, "The country must be governed."
In an interview with the Corriere della Sera daily, D'Alema said: "Nobody has an interest in precipitating the country towards new elections that would be a dramatic shock, not even the 5-Star Movement, which ...I reasonably believe wants to show its ability to bring positive changes for Italy."
Establishment politicians may believe that once Grillo's 162 representatives enter the Senate and lower house these new politicians will break the iron grip of their "spokesman", who will himself not enter parliament, and will be more susceptible to various forms of persuasion by veteran parliamentarians.
Populist movements have a tendency to rapid expansion and contraction, analysts say, and other fresh faces have in the past been absorbed into a more cynical politics.
Berlusconi himself, now seen as symbol of the discredited old political order, first stormed into politics in 1994 as a new face, billing himself as an anti-politics candidate after the massive Tangentopoli, or Bribesville, graft scandal.
His allies in the federalist Northern League, who originally campaigned in the prosperous, industrial north as a force that would sweep away the privileges of "Robber Rome", were almost destroyed by a giant corruption scandal of their own last year.
But sitting tight and hoping the angry mood of the country will abate may be a fatal mistake for the traditional parties.
SWG's Pessato warned the old-hand politicians against miscalculating the extent of the political revolution.
"It depends on their intelligence," he said. "Whether they understand that they must give signals of change or think that somehow Grillo will conveniently be deflated.
"They may think they can absorb him, but if they do not understand the signals from the electorate, there are some parties that will disappear." (Writing by Barry Moody; Editing by Alastair Macdonald)