By Barry Moody
ROME (Reuters) - So bad it is universally known as the "pigsty", Italy's electoral law is at the centre of political instability that is stoking fears the euro zone's third-largest economy could topple into a Greek-style debt crisis.
Market jitters over whether Italy is heading for a default that would probably destroy the euro have been aggravated by uncertainty over what will happen when respected technocrat Prime Minister Mario Monti steps down for elections next spring.
Those worries are compounded by confusion over what electoral system will be used, with time running out for politicians to keep years of promises to replace the law.
The remarkably resilient "porcellum" or pigsty law was passed in 2005. It robs the electorate of the power to choose candidates directly, voting instead for a fixed list selected by party leaders under a proportional system.
This enables the leaders to select compliant party hacks or favorites, including in the case of Silvio Berlusconi a former starlet who became a minister in his last government.
The law also awards a large premium to the winning party or coalition, guaranteeing a strong majority in parliament.
Even the man who introduced the law, the separatist Northern League's Roberto Calderoli, called it "crap" soon afterwards.
Giovanni Sartori, one of Italy's most respected political scientists and the man who gave the law its nickname, told Reuters: "This electoral system is a horror and shameful."
He said it "does the one thing that proportional representation should not do, which is to transform a minority of votes into a majority of seats."
Two attempts to repeal it by referendum have failed, the latest early this year when Italy's highest court ruled out a plebiscite on technical legal grounds despite a petition signed by 1.2 million people.
But while everybody says they want to change the law, the politicians disagree on what to replace it with, and there has been renewed argument over the issue recently within the broad alliance sustaining Monti in parliament.
The issue exposes the remarkable rift between words and deeds among Italy's politicians. A 600-word article by Marco Travaglio in the magazine L'Espresso last week consisted almost entirely of a list of unfulfilled promises of imminent action.
Failure to agree a new law has also pretty much ended speculation about an early election in November.
Berlusconi's People of Freedom (PDL) party is reluctant to go to a vote while its poll ratings are at disastrous lows and its former ally the Northern League is in disarray over a corruption scandal.
In current circumstances it would be the centre-left Democratic Party that would take the majority premium because it tops opinion polls, although it would be unlikely to control the upper house or Senate which has a different electoral system, guaranteeing more instability.
President Giorgio Napolitano has become more and more impatient at failure to change the law, earlier this month making his eighth demand in a year for action.
"I remain concerned to see that an end is no nearer to discussions on a new electoral law," he said on August 10, vowing to closely follow "a process that must lead to the implementation of a mandatory undertaking not to return to the polls with the 2005 law."
Uncertainty over a new law has added to another element of instability: the failure of the political parties to decide how they will present themselves to the electorate in a poll that is only months away.
"It is crucial because you cannot plan your campaign strategy until you know what you are aiming at," said James Walston, politics professor at the American University in Rome.
Monti's sober and determined drive for vital economic reforms has sapped his popularity as harsh austerity bites, but he is still more popular than conventional politicians.
It is often said he has done more to attack runaway debt and chronic lack of growth since being appointed to replace Berlusconi last November than the country's politicians did in 15 years.
This has exposed the latter to a dangerous attack from the populist Five Star Movement of comedian Beppe Grillo, which is vying with Berlusconi's PDL for second place in a vote.
The polling organization SWG said the parties' loss of credibility had made it an "absolute necessity for them to increase their respect among the population."
Nevertheless, the politicians have still not found ways to reinvent themselves or to decide on potential coalitions to put before the voters, some apparently hanging on the idea of a return by Monti although he has repeatedly ruled this out.
Sartori said the parties were paralyzed because the intentions of voters were so unclear. Polls show up to 40 percent undecided, with a risk for mainstream politicians that they could back Grillo or fringe parties.
"The present day parties have no notion of the distribution of the electorate. This explains all the bickering. They are waiting for better information to see what kind of an alliance would benefit them and so on," he said.
"They are shooting around in the dark."
The inertia is compounded because with an election so close, parties are only interested in a law which benefits them directly and disadvantages the others.
All this confirms Italy's bad record for devising electoral systems to overcome its notorious political instability.
The porcellum replaced a previous law that awarded three quarters of seats to candidates who won majorities in individual districts, an attempt to overcome the multiple "revolving door" governments of Italy's so-called First Republic from the end of World War II until 1992.
But that system produced more fragmentation rather than less, Sartori says, because majority systems only provide stability in countries like Britain with an established two or three party set-up - the opposite of Italy.
So the politicians continue to argue as the clock ticks towards an election, with a return to some kind of pure proportional system, with all its disadvantages, the most likely outcome. Unless they choose to stay in the pigsty.
(Editing by Peter Graff)