Italy's centre-left coalition won a majority in the lower house of parliament but the upper house will be deadlocked, the Interior Ministry said on Tuesday after all votes were counted.

After all of the polling booths had been tallied, the centre-left led the centre-right by about 125,000 votes in the lower house, handing it a sizeable majority thanks to a generous winner's bonus.

But the Senate was a different story. The centre left was sure to win more seats than the centre right in the upper house, but fell well short of a majority, even in coalition with outgoing Prime Minister Mario Monti's help.

Since both houses are needed to pass laws, the centre left would need the help of comic Beppe Grillo's 5-Star Movement or Silvio Berlusconi's centre right to pass laws, currently an unlikely prospect. If no agreement can be reached, a new vote would have to be called.

The outcome of the election left many locals disillusioned and unimpressed.

Italian markets had a rollercoaster ride on Monday, with bonds rising and shares soaring after initial telephone polls showed the country's reform-minded centre-left coalition with a slim lead. Worries over a paralysed parliament however quickly erased the gains.

Fears of a political stalemate that could re-ignite the euro zone debt crisis resonated well beyond Italy's borders, with the euro falling to a more than six-week low against the dollar in volatile trade late on Monday.

Presented by Adam Justice