Italy headed for hung parliament as anti-establishment 5-Star Movement projected top vote-getter

Italian voters appear to have delivered a hung parliament on Sunday, flocking to anti-establishment and far-right parties in record numbers and casting the euro zone's third-largest economy into a political gridlock that could take months to clear.

If early projections are confirmed, none of Italy's three main blocs or groups can rule alone and there is little prospect of a return to mainstream government. Scenarios now include a more euro-sceptic coalition or an even return to the polls.

A rightist alliance emerged with the biggest bloc of votes, ahead of the anti-establishment 5-Star Movement, which saw its support soar to become the largest single party, according to projections based on early vote-counting.

The ruling centre-left coalition came third, hurt by anger over growing poverty, high unemployment and mass immigration.

The full result is not due for many hours and previous elections in Italy have seen wild swings as the count proceeds.

A prolonged political stalemate could make heavily indebted Italy the focus of market concern in Europe, now that the threat of German instability has receded after the revival on Sunday of a grand coalition under Chancellor Angela Merkel.

The euro dipped in Asia early on Monday, with investors awaiting clearer results from Italy.

"Italy is far from having sorted its long-standing problems, and now it will have new ones. Be prepared for long and complex negotiations that will take months," said Lorenzo Codogno, a former chief economist at the Italian Treasury.

A centre-right alliance including former prime minister Silvio Berlusconi's Forza Italia (Go Italy!), was seen winning 37.3 per cent in the upper house Senate, according to projections made by SWG pollsters based on early vote counts, short of the 40 per cent analysts believe is needed for a working majority.

The 5-Star Movement was on track to win 32.3 per cent of the vote, while the ruling centre-left Democratic Party (PD) was projected to see its support collapse to 18.9 per cent .

Within the rightist bloc, the League was put on 17.5 per cent, well ahead of the more moderate Forza Italia, suggesting its pledge of zero tolerance on immigration and tough anti-EU rhetoric had resonated with voters.

"My first words: THANK YOU," League leader MatteoSalvini tweeted.

During two months of election campaigning, party leaders repeatedly ruled out any post-election tie-ups with their rivals. However, Italy has a long history of finding a way out of apparently intractable political stalemate.

The 5-Star once rejected talk of any power sharing, but it has since modified its position and says it is willing to discuss shared policies but not negotiate over cabinet posts.

'Italy ungovernable'

The 5-Star, led by 31-year-old Luigi Di Maio, was only formed in 2009 and has fed off public fury over entrenched corruption in the Italian establishment and economic hardship.

"This is a real moment of glory," Alessandro Di Battista, a leading 5-Star figure, told reporters as the first results arrived.

"Everyone will have to come and talk to us."

But some political analysts questioned whether other parties would be able to strike a deal with 5-Star, which portrays itself as an anti-system group.

"Di Maio wins, Italy ungovernable," was the front page headline on the first edition of La Stampa newspaper.

Parliament will meet for the first time on March 23 and formal talks on forming a government are not likely to start until early April.

Financial markets had appeared little concerned by the Italian ballot, but investors are likely to take fright at any suggestion the 5-Star could form a coalition with the League.

Exit polls suggested the two forces would have enough seats to govern together and they have in the past shared strong anti-euro views. While the League still says it wants to leave the single currency at the earliest feasible moment, the 5-Star says the time for quitting the euro has passed.

Founded by comedian Beppe Grillo, 5-Star has sought to allay fears in EU capitals over its policies, dropping some of its more radical proposals, like leaving NATO, and promising to be business-friendly if they win power.

It has always shunned the idea of entering any formal coalition. During the campaign, Di Maio said he would seek cross-party support for his program, which includes "drastic" cuts to corporate taxes, slashing red tape and guaranteeing a minimum monthly income of up to 780 euros ($1,239 Cdn) for the poor.

This so-called Universal Wagehas helped the party draw massive support in the underdeveloped south, with pollsters predicting the 5-Star could sweep most first-past-the-post seats in regions below Rome.

By contrast, Berlusconi and his far-right, populist allies were expected to win the majority of seats in the wealthier north, with the centre-left squeezed into a narrow stretch of territory across central Italy, including Tuscany.

Populist parties have been on the rise across Europe since the 2008 financial crisis. Italy's mainstream parties have found it especially hard to contain voter anger, with the economy still 6 per cent smaller than a decade ago and unemployment stuck at about 11 per cent.