Journalist Woodward said he received White House warning









WASHINGTON—





A prominent Washington journalist said in interviews on Wednesday a senior White House official warned him he would "regret" publishing a story challenging the White House's account of how the idea for automatic spending cuts originated.

Bob Woodward said in interviews with Politico and CNN that when he informed the White House he was writing a story critical of the White House's handling of a debate over the origin of the cuts, known as sequestration, the official reacted angrily.

The aide "yelled at me for about a half hour," Woodward told Politico, and then followed up the tirade with an email.

"I apologize for raising my voice in our conversation today," the official wrote Woodward. "You're focusing on a few specific trees that give a very wrong impression of the forest. But perhaps we will just not see eye to eye here. ... I think you will regret staking out that claim."

Politico reported that Woodward saw the statement as a veiled threat.

"I've tangled with lots of these people," said the journalist, who established his reputation by breaking the story of the Watergate break-in under President Richard Nixon and has written a series of best selling books about Washington politics.

"But suppose there's a young reporter who's only had a couple of years — or 10 years' — experience and the White House is sending him an email saying, ‘You're going to regret this,'" Woodward said. "You know, tremble, tremble. I don't think it's the way to operate."

Some $85 billion in spending cuts are due to go into effect Friday unless Congress acts, and with the deadline approaching there is practically no movement toward preventing them. President Barack Obama has scheduled a meeting with congressional leaders on Friday, but little is expected of the encounter.

The president has crisscrossed the country in recent weeks to draw attention to the inconveniences and problems from the cuts, which economists say could shave 0.6 percentage points off of already anemic U.S. growth.

While the president has been conducting that campaign, the spat over what Woodward calls the "paternity" of the sequester has proven a distracting sideshow to the fiscal battle.

The administration has sought to counter charges by Republicans that the sequestration cuts were proposed by Obama administration officials.

Woodward's book "The Price of Politics" is a fly-on-the-wall account of the negotiations in 2011 that ended with a deal to raise the nation's debt limit. As part of the deal, both sides agreed to make additional efforts to reduce the national budget deficit, and proposed the sequester as an alternative so unappealing that it would force the administration and congressional Republicans to find common ground.

That deal proved elusive and both sides are currently trading blame for the sequestration cuts.

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Woodward said in an article in the Washington Post on Friday that the president and his chief of staff at the time, current Treasury Secretary Jack Lew, were wrong in initially claiming last year that the sequester was the Republicans' idea.

"Obama personally approved of the plan for Lew and (Rob)Nabors to propose the sequester to Senate Majority Leader Harry Reid," Woodward said. "They did so at 2:30 p.m. July 27, 2011, according to interviews with two senior White House aides who were directly involved." Nabors was then the White House's chief liaison to Congress and is now deputy chief of staff.

The administration has argued that both sides agreed to the terms of the sequester and has pointed to comments at the time from House of Representatives Speaker John Boehner, a Republican, that he was for the most part satisfied with the deal that spawned the arrangement.

Woodward's account of his recent testy exchange with the White House points to continued sensitivity over the issue of whose idea the sequester was.

A White House official said in an emailed response to Reuters that no threat was intended by the comment.

"The email from the aide was sent to apologize for voices being raised in their previous conversation," the aide said. "The note suggested that Mr. Woodward would regret the observation he made regarding the sequester because that observation was inaccurate, nothing more."

The BuzzFeed news website identified the official who tangled with Woodward as Gene Sperling, head of the National Economic Council. The White House did not respond to a request to confirm the identity of the official.

News of the exchange drew instant reaction from Washington insiders on Twitter, much of poking fun at the war of words.

"My amateur advice: stop cooperating with Woodward in the first place," wrote Neera Tanden, the president of the liberal-leaning Center for American Progress think tank and a former Obama campaign advisor.

"Hey, guess what? All of you will talk to Woodward for his next book, too," wrote Tony Fratto of Hamilton Place Strategies and a former White House official under President George W. Bush.



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Wall Street inches up after data

MADRID, Feb 27 (Reuters) - Lionel Messi has rarely been accused of failing to deliver in big games, having scored in two European Cup finals, but after subdued performances against AC Milan and Real Madrid, questions are being asked. The four-times World Player of the Year and leading scorer in one of the greatest club teams of all time, was a shadow of his usual self at the San Siro in a Champions League last-16 first leg last week, when Barcelona slumped to a 2-0 defeat. ...
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Minnesota takes down No. 1 Indiana 77-73


MINNEAPOLIS (AP) — Retaining that No. 1 national ranking has been elusive throughout this wild season in college basketball, and Indiana was the latest to lose at the top — again.


Most important and maybe more challenging for the Hoosiers, however, is holding on to first place in the tough-as-ever Big Ten.


Trevor Mbakwe had 21 points on 8-for-10 shooting and 12 rebounds to help Minnesota take down top-ranked Indiana 77-73 on Tuesday night, the seventh time the No. 1 team in the Associated Press poll has lost this season. Three of those losses were by the Hoosiers, who were No. 1 when they fell to Butler and Wisconsin earlier this season. All three opponents were unranked at the time.


Indiana (24-4, 12-3) has held the No. 1 ranking for 10 of the 17 polls by the AP this season, including the last four, and that will likely change next week. But fending off Michigan, Michigan State and Wisconsin is what's on the minds of the Hoosiers, who'll take a one-game lead in the conference race into Saturday's game against Iowa.


"Winning the Big Ten was going to be tough whether we won today or lost," said star guard Victor Oladipo, who had 16 points. "We knew it was going to be tough from the jump. Now it's even tougher. But I think my team is ready for it. We just have to go back and see what we did wrong and correct it."


Andre Hollins added 16 points for the Gophers (19-9, 7-8), who outrebounded Cody Zeller and the Hoosiers by a whopping 44-30 and solidified their slipping NCAA tournament hopes with an emphatic performance against the conference leader. The fired-up fans swarmed the court as the last seconds ticked off, the first time that's happened here since a 2002 win over Indiana.


"There were just too many times when that first shot went up and they were there before we were because we didn't get into their bodies," Hoosiers coach Tom Crean said. "We weren't physical enough on the glass. That's the bottom line."


Zeller, the second-leading shooter in the Big Ten, went 2 for 9. He had nine points with four turnovers. Minnesota had 40 points in the paint to Indiana's 22.


Mbakwe, a sixth-year senior, had a lot to do with that. While positing his conference-leading seventh double-double of the season, the 24-year-old Mbakwe was a man among boys in many ways in this game, dominating both ends of the court when the Gophers needed him most. He grabbed six of Minnesota's 23 offensive rebounds, two of them to keep a key possession alive. His off-balance put-back drew contact for a three-point play with 7:22 left that gave the Gophers a 55-52 lead.


Mbakwe was called for a loudly questioned blocking foul, his fourth, with 4:39 remaining on Zeller's fast-break layup and free throw that put the Hoosiers up 59-58. But Austin Hollins answered with a pump-fake layup that drew a foul for a three-point play and a two-point advantage for the Gophers.


The Hoosiers didn't lead again, and Joe Coleman's fast-break dunk with 2:35 left gave Minnesota a 68-61 cushion that helped it withstand a couple of 3-pointers by Christian Watford and one by Jordan Hulls in the closing minutes. That was the only basket Hulls made after halftime. He had 17 points.


"Just the way we bounced back is unbelievable. We showed that we can beat one of the best teams in the country. Now we have to build off this," said Mbakwe, whose team lost eight of its previous 11 games starting with an 88-81 loss at Indiana on Jan. 12. The Gophers were ranked eighth then. They didn't even receive a vote in the current poll. That could change next week.


The Hoosiers are still in position for their first outright Big Ten regular-season championship since 1993. With another home game against Ohio State on March 5, Indiana could still clinch the title before the finale at Michigan on March 10.


For now, though, the Hoosiers have to regroup and re-establish their inside game after the trampling in the post they endured here.


"They were relentless on the glass. We just didn't do a great job of boxing them out," Oladipo said.


___


Follow Dave Campbell on Twitter: http://www.twitter.com/DaveCampbellAP


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‘Star Trek’ Beams Into Oscar Night






Star Trek” fans got quite a treat last night during the Academy Awards last night (Feb. 24).


Actors who portray major characters from the film and television versions of the iconic science fiction series made cameo appearances during the three-hour-long ceremony celebrating the best movies of 2012.






William Shatner, the actor that played Starship Enterprise captain James T. Kirk in original series helped open the awards show with host, Seth McFarlane.


“I’ve come back in time from the 23rd century to stop you from destroying the Academy Awards,” joked Shatner to McFarlane.


Actors Chris Pine and Zoe Saldana also had a part to play in the festivities. Pine, who plays Kirk in 2009′s “Star Trek” and its sequel “Star Trek Into Darkness “ being released later this year, and Saldana, who plays the Enterprise’s communications officer Uhura, recapped an earlier event they co-hosted on Feb. 10 called the “Sci-Tech Oscars.”


The smaller ceremony is designed to showcase the technical achievements of designers and technicians on movie sets.


The newest movie in the Star Trek franchise, “Star Trek Into Darkness,” is set to be released on May 17.


Follow Miriam Kramer on Twitter @mirikramer or SPACE.com @Spacedotcom. We’re also on Facebook & Google+


Copyright 2013 SPACE.com, a TechMediaNetwork company. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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Benedict: Pope aware of his flaws?




Pope Benedict XVI delivers his last Angelus Blessing to thousands of pilgrims gathered in Saint Peter's Square on February 24.




STORY HIGHLIGHTS


  • Sister Mary Ann Walsh: Pope Benedict acknowledged that he made mistakes

  • Walsh: In firestorm over scholarly quotes about Islam, he went to great lengths to atone

  • Walsh: Similarly, he quickly reversed a decision that had angered Jews and repaired ties

  • Even his stepping down is a nod to his humanity and his love of the church, she says




Editor's note: Sister Mary Ann Walsh is director of media relations for the U.S. Conference of Catholic Bishops and a member of the Sisters of Mercy of the Americas Northeast Regional Community. She is a former foreign correspondent at Catholic News Service (CNS) in Rome and the editor of "John Paul II: A Light for the World," "Benedict XVI: Essays and Reflections on his Papacy," and "From Pope John Paul II to Benedict XVI."


(CNN) -- One of the Bible's paradoxical statements comes from St. Paul's Epistle to the Galatians: "Power is made perfect in infirmity."


The poetic statement proclaims that when we are weak, we are strong. Pope Benedict XVI's stepping down from what many consider one of the most powerful positions in the world proves it. In a position associated with infallibility -- though that refers to formal proclamations on faith and morals -- the pope declares his weakness.



Sister Mary Ann Walsh

Sister Mary Ann Walsh



His acceptance of frailty speaks realistically about humanity: We grow old, weaken, and eventually die. A job, even one guided by the Holy Spirit, as we Roman Catholics believe, can become too much for us.


Acceptance of human frailty has marked this papacy. We all make mistakes, but the pope makes them on a huge stage.


He was barely into his papacy, for example, when he visited Regensburg, Germany, where he once taught theology. Like many a professor, he offered a provocative statement to get the conversation going. To introduce the theme of his lecture, the pope quoted from an account of a dialogue between the Byzantine Emperor Manuel II Paleologus and an unnamed Muslim scholar, sometime near the end of the 14th century -- a quote that was misinterpreted by some as a condemnation of Mohammed and Islam.


Opinion: 'Gay lobby' behind pope's resignation? Not likely


Twice, the pope emphasized that he was quoting someone else's words. Unfortunately, the statement about Islam was taken as insult, not a discussion opener, and sparked rage throughout the Muslim world.


The startled pope had to explain himself. He apologized and traveled two months later to Istanbul's Blue Mosque, where he stood shoeless in prayer beside the Grand Mufti of Istanbul. Later he hosted Muslim leaders at the Vatican at the start of a Catholic-Muslim forum for dialogue. It was a human moment -- a mistake, an apology and atonement -- all round.










A similar controversy erupted when he tried to bring the schismatic Society of St. Pius X back into the Roman Catholic fold.


In a grand gesture toward reconciliation, he lifted the excommunication of four of its bishops, unaware that one, Richard Williamson, was a Holocaust denier. This outraged many Jews. Subsequently the Vatican said the bishop had not been vetted, and in a bow to modernity said officials at least should have looked him up on the Internet.


In humble response, Benedict reiterated his condemnation of anti-Semitism and told Williamson that he must recant his Holocaust views to be fully reinstated. Again, his admission of a mistake and an effort to mend fences.


News: Scandal threatens to overshadow pope's final days


Pope Benedict XVI came from a Catholic Bavarian town. Childhood family jaunts included trips to the shrine of the Black Madonna, Our Lady of Altotting. He entered the seminary at the age of 13. He became a priest, scholar and theologian. He lived his life in service to the church. Even in resigning from the papacy, he embraces the monastic life to pray for a church he has ever loved.


With hindsight, his visit to the tomb of 13th century Pope Celestine V, a Benedictine monk who resigned from the papacy eight centuries before, becomes poignant.


In 2009, on a visit to Aquila, Italy, Benedict left at Celestine's tomb the pallium, a stole-like vestment that signifies episcopal authority, that Benedict had worn for his installation as pope. The gesture takes on more meaning as the monkish Benedict steps down.


We expect the pope to be perfect. Catholics hold him to be the vicar of Christ on earth. He stands as a spiritual leader for much of the world. Statesmen visit him from around the globe. He lives among splendid architecture, in the shadow of the domed St. Peter's Basilica. All testify to an almost surreal omnipotence.


Complete coverage of the pope's resignation


In this world, however, walked a vulnerable, human person. And in a paradox of life, his most human moment -- giving up the power of office -- may prove to be his most potent, delivering a message that, as St. Paul noted many centuries ago, "Power is made perfect in infirmity."


Follow @CNNOpinion on Twitter.


Join us at Facebook/CNNOpinion.


The opinions expressed in this commentary are solely those of Mary Ann Walsh.






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Obama to meet with congressional leaders to discuss budget cuts




















Speaker of the House John Boehner tells Scott Pelley in a "CBS Evening News" interview that a budget deal is now out of his hands.




















































WASHINGTON -- President Barack Obama will meet with top congressional leaders on Friday to discuss the deep, automatic government spending cuts slated to go into effect that day, congressional aides said


Known as the sequester or sequestration, the cuts amount indiscriminate across-the-board reductions in federal spending totalling $85 billion.


Obama is set to meet with Republican Speaker of the House of Representatives John Boehner, Senate Republican Leader Mitch McConnell, Democratic Senate Majority leader Harry Reid and Nancy Pelosi, the House Democratic leader.








"The meeting Friday is an opportunity for us to visit with the president about how we can all keep our commitment to reduce Washington spending," McConnell said in a statement.


"We can either secure those reductions more intelligently, or we can do it the president's way with across-the board cuts. But one thing Americans simply will not accept is another tax increase to replace spending reductions we already agreed to," he said.


Republicans on Capitol Hill immediately questioned Obama's intent.


"If the president is serious about stopping the sequester, why did he schedule a meeting on Tuesday for Friday when the sequester hits at midnight on Thursday?” asked a Republican congressional aide who was not authorized to talk about the private meeting. "Either someone needs to buy the White House a calendar, or this is just a belated farce.  They ought to at least pretend to try."


Reuters and Lisa Mascaro, the Los Angeles Times






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SAfrica: judge in Pistorius case suffers loss


JOHANNESBURG (AP) — Last week, the judge who granted bail to Oscar Pistorius was in the international spotlight, presiding over dramatic hearings in a courtroom as the Olympic athlete sat in the dock charged with murdering his girlfriend. This week, the judge is in private mourning.


Desmond Nair, chief magistrate of the Pretoria Magistrate's Court, confirmed Tuesday that he is related to a woman suspected of killing her two children and committing suicide on the weekend.


The revelation was the latest twist in the saga of Pistorius and prominent figures linked to the case against the double-amputee athlete, who faces a charge of premeditated murder in the Feb. 14 shooting death of Reeva Steenkamp, a 29-year-old model who appeared in a television reality show.


The bodies of a woman and her two sons were found Sunday evening at their Johannesburg home by her ex-husband, police Warrant Officer Balan Muthan said. Authorities suspect the woman administered a substance that killed her children, and took her own life by ingesting it as well.


"I can confirm the deceased is my first cousin," Nair told The Associated Press in a telephone interview.


The woman's brother, Vishal Maharaj, identified her as Anusha Maharaj. Police said Maharaj was her family name before she married. South African media identified her as Anusha Mooljee.


Muthan said police suspect "she took her own life by ingesting a substance that killed her," and that she "most probably" gave the same substance to her children. Autopsies were conducted Monday and toxicologists were analyzing the substance believed to have killed the three family members.


Suicide notes were found and a murder investigation was underway, Muthan said. He said copies of the notes were admitted as evidence in the probe and declined to comment on the contents.


Eyewitness News, a South African media outlet, said the boys who died were 12 and 17 years old and cited neighbor Claire Osment as saying she rushed outside after hearing screams coming from the townhouse where they lived.


"We asked what happened. The dad just said, 'She has killed my boys.' He was just crying," Eyewitness News quoted her as saying. "He couldn't believe it, he couldn't believe that his sons are gone."


Nair, 44, has presided over a number of high-profile cases, including the 2008 conviction on fraud charges of Sydney Maree, a South African who took American citizenship and became a track star in the United States; a 2011 plea agreement in which rugby player Bees Roux received a five-year suspended prison sentence for the beating death of a policeman; and inquiries into alleged misconduct by magistrates around South Africa.


On Friday, Nair delivered a lengthy discourse on why he was granting bail to Pistorius, including an assertion that prosecutors had not argued persuasively that the Paralympian was a flight risk. Nair criticized shortcomings in the state's investigation, but he also said aspects of Pistorius' account of what happened were not convincing.


Pistorius says he killed Steenkamp accidentally, opening fire after mistaking her for an intruder in his home. Prosecutors alleged he intentionally shot her after the couple had an argument.


Last week, the chief investigator in the case against Pistorius, Hilton Botha, was removed from the inquiry after it was revealed that attempted murder charges against him had been reinstated in early February. The charges relate to a 2011 incident in which Botha and two other police officers allegedly fired on a minibus.


In another surprise, a lawyer for the Pistorius family said Sunday that Oscar's brother, Carl, faces a charge of unlawful, negligent killing for a 2008 road death. That charge had also been dropped and later reinstated.


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‘Star Trek’ Beams Into Oscar Night






Star Trek” fans got quite a treat last night during the Academy Awards last night (Feb. 24).


Actors who portray major characters from the film and television versions of the iconic science fiction series made cameo appearances during the three-hour-long ceremony celebrating the best movies of 2012.






William Shatner, the actor that played Starship Enterprise captain James T. Kirk in original series helped open the awards show with host, Seth McFarlane.


“I’ve come back in time from the 23rd century to stop you from destroying the Academy Awards,” joked Shatner to McFarlane.


Actors Chris Pine and Zoe Saldana also had a part to play in the festivities. Pine, who plays Kirk in 2009′s “Star Trek” and its sequel “Star Trek Into Darkness “ being released later this year, and Saldana, who plays the Enterprise’s communications officer Uhura, recapped an earlier event they co-hosted on Feb. 10 called the “Sci-Tech Oscars.”


The smaller ceremony is designed to showcase the technical achievements of designers and technicians on movie sets.


The newest movie in the Star Trek franchise, “Star Trek Into Darkness,” is set to be released on May 17.


Follow Miriam Kramer on Twitter @mirikramer or SPACE.com @Spacedotcom. We’re also on Facebook & Google+


Copyright 2013 SPACE.com, a TechMediaNetwork company. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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Polls open to find likely successor to ex-Rep. Jackson Jr.

Election Day in Cicero and 2nd District. Polls open from 6 a.m. to 7 p.m.









Voters are headed to the polls today to pick the likely successor to disgraced former U.S. Rep. Jesse Jackson Jr. in a congressional district covering the South Side and south suburbs.

There are primaries for both political parties, but the 2nd District is so heavily Democratic that whoever emerges from the crowded Democratic field is expected to easily win the April 9 special general election. Polls are open from 6 a.m. to 7 p.m.

Today's voting follows weeks of candidate forums, an accelerated campaign schedule and a flurry of TV ads from the mayor of New York. While the top-tier candidates among the 14 Democrats vying for the primary nomination are known — former state Rep. Robin Kelly, former U.S. Rep. Debbie Halvorson and Chicago 9th Ward Ald. Anthony Beale — there also are some big unknowns. Voter turnout, already anticipated to be very low, could be exacerbated by nasty weather.

Kelly voted early. Beale and Halvorson planned to vote today. All three candidates have a slew of campaign stops scheduled before gearing up for evening parties where they'll watch the results come in.



The results of early voting held between Feb. 11 and Saturday demonstrated a lack of interest in the contest, despite its ramifications in deciding who will represent voters and their disparate interests in the vast district.

A majority of the district's Democratic voters live in suburban Cook County, with an additional one-third from the South Side. The district also includes parts of eastern Will County and all of Kankakee County, and together the two regions make up slightly less than 10 percent of the Democratic vote.

In suburban Cook, 4,459 early votes were cast, with 98 percent of those voters taking Democratic ballots. Of the 11 suburban early voting locations, Matteson Village Hall, in Kelly's hometown, had the most with 1,601 voters.








In Chicago, 98 percent of the 2,768 early voters cast Democratic ballots. Only 63 early votes were cast for Republicans.

In Will, 246 voters cast early ballots, all but 40 of them Democratic votes. Kankakee County officials reported 699 early ballots, with 533 voting Democrat and 166 Republican.

"I just think if it was a regular race, then they'd look a little bit different," Kelly said of the low early voting totals. "I also think because (the special primary) came so close to the November election that there's some (voter) fatigue."

But in a large field of candidates and questionable turnout, a nomination for Congress could be decided by mere hundreds of votes. Even as forecasters sounded warnings of a Tuesday smorgasbord of wintry weather, candidates sought to energize core supporters to help get out the vote.

In an email to supporters, Kelly's campaign pleaded for volunteers to help get voters to the polls and asked for money for its get-out-the-vote field operation.


Halvorson acknowledged the early voting numbers were "paltry" and that voter turnout would be a "huge" factor Tuesday. Halvorson said she believed turnout could be driven by the district's history of scandals — including last week's guilty plea by Jackson on federal charges of illegally converting about $750,000 in campaign cash to personal use.

"I think this race has gotten so much attention and people are so angry about what the 2nd Congressional District has had to deal with over the years that they're going to take a special interest to make sure they are going to vote for someone who is completely different than what they've seen," said Halvorson, of Crete.

Halvorson also has been the target of the most extensive advertising in the contest, more than $2.2 million worth of TV and mail attacks by New York Mayor Michael Bloomberg's super political action committee, centered on her past National Rifle Association support. Bloomberg's Independence USA PAC is backing Kelly.

Beale said the low number of early ballots puts all the more importance on Election Day field efforts. He said that well-established organizations in the six city wards in the district could serve as an advantage for his campaign.

"It's just slow across the board, and that just goes to show it is going to be a very low turnout," Beale said of the early votes. "We're just making sure we're targeting our core, solid voters, and we're going to get them out to the polls and be victorious Tuesday night."

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Italy parties seek way out of election stalemate


ROME (Reuters) - Italy's stunned political parties looked for a way forward on Tuesday after an election that gave none of them a parliamentary majority, posing the threat of prolonged instability and European financial crisis.


The results, notably by the dramatic surge of the anti-establishment 5-Star Movement of comic Beppe Grillo, left the center-left bloc with a majority in the lower house but without the numbers to control the powerful upper chamber, the Senate.


Financial markets fell sharply at the prospect of a stalemate that reawakened memories of the crisis that pushed Italy's borrowing costs toward unsustainably high levels and brought the euro zone to the brink of collapse in 2011.


"The winner is: Ingovernability," ran the headline in Rome newspaper Il Messaggero, reflecting the deadlock the country will have to confront in the next few weeks as sworn enemies are forced to work together to form a government.


Pier Luigi Bersani, head of the center-left Democratic Party (PD), has the difficult task of trying to agree a "grand coalition" with former prime minister Silvio Berlusconi, the man he blames for ruining Italy, or striking a deal with Grillo, a completely unknown quantity in conventional politics.


The alternative is new elections either immediately or within a few months, although both Berlusconi and Bersani have indicated that they want to avoid a return to the polls if possible: "Italy cannot be ungoverned and we have to reflect," Berlusconi said in an interview on his own television station.


For his part, Grillo, whose "non-party" movement won the most votes of any single party, has indicated that he believes the next government will last no more than six months.


"They won't be able to govern," he told reporters on Tuesday. "Whether I'm there or not, they won't be able govern."


He said he would work with anyone who supported his policy proposals, which range from anti-corruption measures to green-tinted energy measures but rejected suggestions of entering a formal coalition: "It's not time to talk of alliances... the system has already fallen," he said.


The election, a massive rejection of the austerity policies applied by Prime Minister Mario Monti with the backing of international leaders from U.S. President Barack Obama to German Chancellor Angela Merkel, caused consternation across Europe.


"This is a jump to nowhere that does not bode well either for Italy or Europe," said Spanish Foreign Minister Jose Manuel Garcia-Margallo.


In a sign of worry at the top over what effect the elections could have on the economy, Monti, whose austerity policies were repudiated by voters who shunned his centrist bloc, met the governor of the central bank, the economy minister and the European affairs minister to discuss the situation on Tuesday.


The former EU commissioner and his team of technocrats, who were brought in to govern when Berlusconi was consumed by crisis and scandal, will stay on until a new administration is formed.


UNTHINKABLE WITHOUT GRILLO


Projections for the Senate by the Italian Centre for Electoral Studies indicated that the center-left would have 121 seats, against 117 for the center-right alliance of Berlusconi's PDL and the regionalist Northern League. Grillo would take 54.


That leaves no party with the majority in a chamber which a government must control to pass legislation and opened up the prospect of previously inconceivable partnerships that will test the sometimes fragile internal unity of the main parties.


"The idea of a majority without Grillo is unthinkable. I don't know if anyone in the PD is considering it but I'm against it," said Matteo Orfini, a member of Bersani's PD secretariat.


"The idea of a PD-PDL government, even if it's backed by Monti, doesn't make any sense," he said.


Berlusconi, a media magnate whose campaigning all but wiped out Bersani's once commanding opinion poll lead, hinted in a telephone call to a morning television show that he would be open to a deal with the center-left - but not with Monti, the economics professor who replaced him 15 months ago.


"Italy must be governed," Berlusconi said, adding that he "must reflect" on a possible deal with the center-left. "Everyone must be prepared to make sacrifices," he said of the groups which now have a share of the legislature.


The Milan bourse was down almost 4 percent and the premium Italy pays over Germany to borrow on 10-year widened to a yield spread of 338 basis points, the highest since December 10 and more than 80 points above the level seen earlier on Monday.


At an auction of six-month Treasury bills, Italy's borrowing costs jumped by more than two thirds with the yield reaching 1.237 percent, the highest since October and compared to just 0.730 percent in a similar sale a month ago.


The euro dropped to an almost seven-week low against the dollar in Asia on fears of a revival of the euro zone crisis. It fell as far as $1.3042, its lowest since January 10.


"What is crucial now is that a stable functioning government can be built as swiftly as possible," said German Foreign Minister Guido Westerwelle. "This is not only in the interests of Italy but in the interests of all Europe."


However the view from some voters, weary of the mainstream parties, was unrepentant: "It's good," said Roger Manica, 28, a security guard in Rome, who voted for the center-left PD.


"Next time I'll vote 5-Star. I like that they are changing things, even if it means uncertainty. Uncertainty doesn't matter to me, for me what's important is a good person who gets things done," he said. "Look how well they've done."


A long recession and growing disillusionment with mainstream parties and tax-raising austerity fed the bitter public mood and contributed to the massive rejection of Monti, whose centrist coalition was relegated to the sidelines.


Berlusconi's campaign, mixing sweeping tax cut pledges with relentless attacks on Monti and Merkel, echoed many of the themes pushed by Grillo and underlined the increasingly angry mood of the Italian electorate.


But even if the next government turns away from the tax hikes and spending cuts brought in by Monti, it will struggle to revive an economy that has scarcely grown in two decades.


Monti was widely credited with tightening Italy's public finances and restoring its international credibility after the scandal-plagued Berlusconi, who is currently on trial for having sex with an under-age prostitute.


However he struggled to pass the kind of structural reforms needed to improve competitiveness and lay the foundations for a return to economic growth. A weak center-left government may not find it any easier.


For Italian business, with an illustrious history of export success, the election result brought dismay that there would be no quick change to what they see as a regulatory sclerosis that has kept the economy virtually stagnant for a decade.


"This is probably the worst possible scenario," said Francesco Divella, whose family began selling pasta under its eponymous brand in 1890 in the southern region of Puglia.


"We are very concerned about the uncertainty and apparent ungovernability," said Silvio Pietro Angori, chief executive of Pininfarina, which has designed Ferrari sportscars since 1950. "A company competing on the global markets like Pininfarina needs the support of a stable government that inspires trust."


One of the country's leading bankers summed up his personal reaction: "I'm in shock," he told Reuters. "What a mess!"


(Additional reporting by Barry Moody, Gavin Jones, Lisa Jucca, Steven Jewkes, Steve Scherer Writing by Philip Pullella and James Mackenzie; Editing by Alastair Macdonald)



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