The interest rate on the country's benchmark 10-year bond — an important gauge of investor sentiment — rose by 0.33 percentage points to 4.77 percent. Investors sought protection in the bonds of more stable and prosperous economies, such as German government bonds.
Whether Tuesday's negative market reaction extends further into the week may hinge on how quickly a solution is reached in Italy. Despite the uncertainty, Italy's Treasury managed to sell €8.75 billion ($11.75 billion) of short-term debt though at a higher cost.
Silvio Berlusconi, the former Italian premier whose center-right coalition did better than expected, insisted that a government can be formed and called on Italians to ignore the "crazy markets." Berlusconi is a key player as his coalition is now the second-biggest bloc in the upper chamber.
"Markets go their own way. They are independent and also a little crazy," he said, adding that a government can be cobbled together if rival politicians are willing to "make some sacrifices."
Stinging from a loss of some 4 million votes compared to the last election in 2008, Bersani hasn't yet identified potential coalition partners. But top officials in his Democratic Left (PD) party were quick to rule out any deal with Berlusconi.
"As far as I go, absolutely not," Stefano Fassina, a PD official said of a possible Bersani-Berlusconi alliance.
A big surprise in the election was the strong showing by comic-turned-political leader Beppe Grillo, whose 5 Star Movement capitalized on a wave of voter disgust with the ruling political class. Grillo's bloc of seats in Parliament could prove crucial in making any coalition government viable.
