It is a cliffhanger in Italy’s elections where left-of-center Romano Prodi commands a lead of 49.8% to 49.7% for parliamentary seats and where right-of-center incumbent Silvio Berlusconi has a marginal lead of 155 over 154 seats in the senate. Expect many recounts.

Whatever the outcome it is clear that Berlusconi was not able to obtain a strong endorsement at the ballot box and this is another setback for Europe’s right, ironically on the day that pro-market forces in France were dealt a humiliating defeat. Interestingly, labor reform played its part in Italy too:

Among other measures that centre-left leaders regarded as priorities were a plan to reduce incentives for companies to hire temporary staff and the abolition of a Berlusconi government reform that raises the minimum retirement age to 60 from 57 in 2008.

These proposals did not please advocates of more flexible labour markets and more drastic reforms of the state pension system, but they were intended to satisfy the communist and radical parties that form the left flank of Mr Prodi's coalition.

Given the shape and interests of Mr. Prodi’s coalition it seems that even under the best of circumstances he would have faced an uphill struggle in bringing some necessary economic reform to Italy. With the wafer thin mandate he now has it is unlikely we will see any meaningful action coming out of Rome. My prediction: back to the polls sooner rather than later.