U.S. to give Syrian rebels medical, food aid, not arms

ROME (Reuters) - The United States will send non-lethal aid directly to Syrian rebels for the first time, Secretary of State John Kerry said on Thursday, disappointing opponents of President Bashar al-Assad who are clamoring for Western weapons.

But in a change of emphasis, the mainly Western and Arab "Friends of Syria" group meeting in Rome "underlined the need to change the balance of power on the ground".

A final communique said participants would "coordinate their efforts closely so as to best empower the Syrian people and support the Supreme Military Command of the (rebel) Free Syrian Army in its efforts to help them exercise self-defense".

More than 70,000 Syrians have been killed in a fierce conflict that began with peaceful anti-Assad protests nearly two years ago. Some 860,000 have fled abroad and several million are displaced within the country or need humanitarian assistance.

Kerry, after the talks in Rome, said Washington would more than double its aid to the Syrian civilian opposition, giving it an extra $60 million to help provide food, sanitation and medical care to devastated communities.

The United States would now "extend food and medical supplies to the opposition, including to the Syrian opposition's Supreme Military (Council)", Kerry said.

In their communique, the "Friends of Syria" pledged more political and material support to the Syrian National Coalition, a fractious Cairo-based group that has struggled to gain traction inside Syria, especially among disparate rebel forces.

Riad Seif, a coalition leader, said before the Rome meeting that the opposition would demand "qualitative military support".

Another coalition official welcomed the result of the talks. "We move forward with a great deal of cautious optimism. We heard today a different kind of discourse," Yasser Tabbara said.

But the continued U.S. refusal to send weapons may compound the frustration that prompted the coalition to say last week it would shun the Rome talks. It attended only under U.S. pressure.

Many in the coalition say Western reluctance to arm rebels only plays into the hands of Islamist militants now widely seen as the most effective forces in the struggle to topple Assad.

However, a European diplomat held out the possibility of Western military support, saying the coalition and its Western and Arab backers would meet in Istanbul next week to discuss military and humanitarian support to the insurgents.

MEALS READY TO EAT

Kerry's offer of medical aid and Meals Ready to Eat (MREs), the U.S. army's basic ration, fell far short of rebel demands for sophisticated anti-tank and anti-aircraft weapons to help turn the tables against Assad's mostly Russian-supplied forces.

It also stopped short of providing other forms of non-lethal assistance such as bullet-proof vests, armored personnel vehicles and military training to the insurgents.

Last week the European Union opened the way for direct aid to Syrian rebels, but did not lift an arms embargo on Syria.

The Rome talks again signaled the lack of appetite among the United States and its allies for direct military intervention in Syria, after the withdrawal of U.S.-led troops from Iraq and the drawdown under way in Afghanistan.

The communique called for an immediate halt to "unabated" arms supplies to Damascus by third countries, referring mostly to Assad's allies Russia and Iran.

It also said Syria must immediately stop indiscriminate bombardment of populated areas, which it described as crimes against humanity. NATO officials say Assad's military has fired ballistic missiles within Syria, which the government denies.

Human Rights Watch has reported that at least 171 civilians were killed in four Scud missile strikes last week.

The "Friends of Syria" pledged "more political and material support to the coalition as the sole legitimate representative of the Syrian people and to get more concrete assistance inside Syria", but gave no details on exactly what would be provided.

Kerry said earlier this week he would not leave the Syrian opposition "dangling in the wind", unsure of getting support.

But the White House continues to resist providing weaponry to the rebel forces, arguing there is no way to guarantee the arms might not fall into the hands of Islamist militants who might eventually use them against Western or Israeli targets.

"HUGE DEBATE"

U.S. officials have said that the U.S. Defense and State departments, under former Secretary of Defense Leon Panetta and former Secretary of State Hillary Clinton, privately recommended that the White House arm the rebels, but were overruled.

"It's a huge debate inside the administration between those that have to deal with Syria on an everyday basis, the State Department and DoD (Defense) particularly, and the White House, which ... until now has vetoed any kind of outreach to the armed groups," said Andrew Tabler, senior fellow at the Washington Institute for Near East Policy, a think-tank.

The United States says it has already provided more than $50 million in non-lethal assistance such as communications gear and governance training to Syria's civilian opposition.

A source in the Syrian coalition, however, said even the extra $60 million promised by Washington was a pittance compared to what he said was the $40 million a day in humanitarian aid needed for Syrian refugees and internally displaced persons.

The United States has provided some $365 million in humanitarian aid for Syrian refugees in countries such as Turkey, Jordan and Lebanon and for internally displaced people, channeling this money through non-governmental organizations.

More than 40,000 people a week are fleeing Syria and the total number of refugees will likely pass 1 million in less than a month, far sooner than the United Nations had forecast, a senior U.N. official told the Security Council on Wednesday.

U.N. High Commissioner for Refugees António Guterres said his agency had registered 936,000 Syrians across the Middle East and North Africa, nearly 30 times as many as in April last year.

"We expected to have 1.1 million Syrian refugees by June. If things continue to accelerate like this, it will take less than a month to reach that number," he told the 15-member council.

(Writing by Alistair Lyon; Editing by Mark Heinrich)

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N. Korea's Kim, Rodman watch basketball game: Xinhua

BEIJING: North Korean leader Kim Jong-Un watched a basketball game with former Chicago Bulls' star Dennis Rodman on Thursday, Chinese state media reported.

In a dispatch from Pyongyang, China's official Xinhua news agency said that Kim and Rodman watched a game consisting of players from North Korea and the Harlem Globetrotters, a famed goodwill team from the United States.

Xinhua, which has a bureau in the North Korean capital, cited unidentified witnesses for its account.

Rodman, a 51-year-old Hall of Famer, was quoted as calling relations between the United States and North Korea "regrettable", though added "personally I am a friend of Marshal Kim Jong-Un and the DPRK people".

DPRK stands for the Democratic People's Republic of Korea, the North's official name.

Nicknamed "The Worm" and famed for his changing hair colour, off-court antics and dating Madonna, Rodman arrived in the state this week with tensions high following the North's third nuclear test earlier in February.

Rodman wore dark glasses and a hat, Xinhua said, and sat to the left of Kim. They spoke to each other without any interpretation, according to the report.

He arrived in Pyongyang on Tuesday with members of the Globetrotters on a goodwill visit to engage in "basketball diplomacy".

Kim is the son of late North Korean leader Kim Jong-Il and the grandson of the country's founder Kim Il-Sung. He is reported to be a huge fan of basketball and the Chicago Bulls.

Rodman has been actively tweeting during the visit, saying he was looking forward to meeting Kim, that North Koreans love basketball and that he was "honoured" to represent the United States.

North Korea and the United States, an ally of South Korea, have never had diplomatic relations.

Xinhua said Thursday's game consisted of 12 players from North Korea and four Globetrotters divided up into two teams.

The game, attended by college students, citizens of Pyongyang and foreign diplomats, among others, ended in a 110-110 tie, Xinhua said. North Korean cheerleaders in traditional dress and miniskirts performed during the break.

Separately, North Korea's state news agency reported on Thursday that Rodman and his entourage visited the landmark Pyongyang building where the bodies of Kim's father and grandfather lie in state.

"They paid high tribute to Kim Il-Sung and Kim Jong-Il before their statues", the Korean central News Agency said. "They entered the halls where Kim Il-Sung and Kim Jong-Il lie in state and paid homage to them."

- AFP/xq

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Mobile oddities: Delve into the stranger side of MWC

Fujitsu's New Generation GPS Cane puts directions at your fingertips.

(Credit:
Sarah Tew/CNET)

Imagine waking up, reaching for the tablet on your nightstand, and turning on your coffee maker from bed. You catch a few more winks before it alerts you that your hot java's ready. If Qualcomm's concept Wi-Fi coffee maker ever goes into production, your mornings may never be quite the same.

The coffee maker, however, is just one of many odd and unusual gadgets on display at Mobile World Congress in Barcelona.

Fujitsu rolled (or walked) out a cane equipped with GPS, Wi-Fi, and Bluetooth that could help seniors get around. BeeWi showed off an early version of its Mobot power plug. Not only can you use it to remotely turn electrical devices off and on with your phone, but it also has a motion sensor and temperature sensor to warm you when things get too hot.

Revel in the weird and wonderful world of the wackier side of Mobile World Congress. If you ever dreamed of having a folding phablet or a smartphone that comes from a company that also makes compactors and hydraulic excavators, this is the place for you.

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Anti-virus firm makes new revelation on Stuxnet

Updated at 11:22 a.m. ET

LONDON The sophisticated cyberweapon which targeted an Iranian nuclear plant is older than previously believed, an anti-virus firm said Tuesday, peeling back another layer of mystery on a series of attacks attributed to U.S. and Israeli intelligence.

The Stuxnet worm, aimed at the centrifuges in Iran's Natanz plant, transformed the cybersecurity field because it was the first known computer attack specifically designed to cause physical damage. The precise origins of the worm remain unclear, but until now the earliest samples of Stuxnet had been dated to 2009.

Security experts generally agree that Stuxnet was an attempt to sabotage Iran's uranium enrichment centrifuges, which can be used to make fuel for reactors or weapons-usable material for atomic bombs. Iran maintains its nuclear program is for peaceful purposes.

Play Video

Stuxnet: Computer worm opens new era of warfare

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Stuxnet copycats: Let the hacking begin

As "60 Minutes" correspondent Steve Kroft reported last year, Stuxnet was incredibly complicated and sophisticated, beyond the cutting edge. By the time it was first detected in June 2010, it had been out in the wild for a year without drawing anyone's attention, and seemed to spread by way of USB thumb drives, not over the Internet.

By the fall of 2010, the consensus was that Iran's top secret uranium enrichment plant at Natanz was the target and that Stuxnet was a carefully constructed weapon designed to be carried into the plant on a corrupted laptop or thumb drive, then infect the system, disguise its presence, move through the network, changing computer code and subtly alter the speed of the centrifuges without the Iranians ever noticing, Kroft reported.

"Stuxnet's entire purpose is to control centrifuges," Liam O Murchu, an operations manager for Symantec, told Kroft. "To make centrifuges speed up past what they're meant to spin at and to damage them. Certainly it would damage the uranium enrichment facility and they would need to be replaced."

Last June, The New York Times traced the origins of the top-secret program back to 2006.

In a new report issued late Tuesday, Symantec Corp. pushed that timeline further back, saying it had found a primitive version of Stuxnet circulating online in 2007 and that elements of the program had been in place as far back as 2005.

One independent expert who examined the report said it showed that the worm's creators were particularly far-sighted.

"What it looks like is that somebody's been thinking about this for a long, long time — the better part of a decade," said Alan Woodward, a computer science professor at the University of Surrey. "It really points to a very clever bunch of people behind all of this."

Nuclear Iran: Sites and potential targets

A look at the locations where Iran carries out work linked to its suspected pursuit of nuclear weapons

The Times reported that President George W. Bush ordered the deployment of Stuxnet against Iran in a bid to put the brakes on its atomic energy program, detailing how the worm tampered with the operation of Natanz's centrifuge machines to send them spinning out of control.

President Obama, who succeeded Bush shortly after the first attacks, expanded the campaign, the report said.

U.S. and Israeli officials have long declined to comment publicly on Stuxnet or their alleged involvement in creating and deploying the computer worm.

Symantec's report suggests that an intermediate version of the worm — Stuxnet 0.5 — was completed in November 2007. That worm lacked some of the sophistication of its descendant, Symantec said, and was designed to interfere with the centrifuges by opening and closing the valves which control the flow of uranium gas, causing a potentially damaging buildup in pressure.

That approach was dropped in later, improved versions of the Stuxnet code.

Symantec said the servers used to control the primitive worm were set up in November 2005, suggesting that Stuxnet's trailblazing authors were plotting out their attack at a time when many parts of the Internet now taken for granted were not yet in place. Twitter did not exist, Facebook was still largely limited to U.S. college campuses, and YouTube was in its infancy.

Woodward said that had troubling implications.

"Clearly these were very forward-thinking, clever people that were doing this," he said. "There's no reason to think that they're less forward-thinking now. What are they up to?"

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Bring on the Cuts: Some Want the Sequester

Mark Lucas wouldn't mind seeing America's defense budget cut by billions.

"There's quite a bit of waste within the military," Lucas, who serves as Iowa state director for the conservative group Americans for Prosperity (AFP), told ABC News. "Being in there for 10 years, I've seen quite a bit of it."

With the budget sequester set to kick in on Friday, the former Army ranger is among a small chorus of conservatives saying bring on the cuts.

Read more: Bernanke on Sequester Cuts: Too Much, Too Soon

Lucas cited duplicative equipment purchases, military-run golf courses and lavish food on larger bases -- unlike the chow he endured at a combat operations post in Afghanistan with about 120 other soldiers.

"These guys would have very good food, and I'm talking almost like a buffet style, shrimp and steak once a week, ice cream, all this stuff," Lucas said. "They had Burger Kings and Pizza Huts and McDonald's. And I said to myself, 'Do we really need this?'"

Lucas and AFP would like to see the sequester modified, with federal agencies granted more authority to target the cuts and avoid the more dire consequences. But the group wants the cuts to happen.

"We're very supportive of the sequestration cuts but would prefer to see more targeted cuts at the same level," said the group's spokesman, Levi Russell.

As President Obama and his Cabinet members are sounding the sequester alarm bells, AFP's willingness shows that not everyone is running for the hills.

Charles Dharapak/Pool/AP Photo

Speaker Boehner Hopes Senate 'Gets Off Their Ass' Watch Video

Sequester Showdown: Automatic Spending Cuts Loom Watch Video

President Obama Details Consequences of Sequester Cuts Watch Video

Read more: 57 Terrible Consequences of the Sequester

Obama traveled to Norfolk, Va., on Tuesday to speak at a shipyard about cuts and layoffs to defense contractors. In his most recent weekly radio address, he told Americans that the Navy has already kept an aircraft carrier home instead of deploying it to the Persian Gulf. And last week, he spoke before national TV cameras at the White House, warning that first responders would be laid off.

Homeland Security Secretary Jane Napolitano has warned that the sequester will "leave critical infrastructure vulnerable to attacks." Transportation Secretary Ray LaHood has warned that air travel will back up after the Federal Aviation Administration furloughs air traffic controllers. And the heads of 18 other federal agencies told Congress that terrible things will happen unless the sequester is pushed off.

Some Republicans have accused the president of scaremongering to gin up popular support for tax hikes. Obama has warned of calamity and demanded compromise in the next breath, and a few Republicans have rejected this as a false choice.

Read more: Boehner Hopes Senate 'Gets Off Their Ass'

"I don't think the president's focused on trying to find a solution to the sequester," House Speaker John Boehner told reporters at a press conference on Tuesday. "For 16 months, the president's been traveling all over the country holding rallies, instead of sitting down with Senate leaders in order to try to forge an agreement over there in order to move the bill."

After Obama spoke to governors at the this week, Republican Louisiana Gov. Bobby Jindal told ABC News' Jonathan Karl outside the White House that the president is exaggerating the sequester's consequences.

"He's trying to scare the American people," Jindal said. "He's trying to distort the impact."

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Sausages containing horsemeat found in Russia: official

MOSCOW: Russia said on Wednesday it had found horsemeat in a shipment of sausages imported from Europe, its first known case of horsemeat contamination.

Alexei Alexeyenko, an aide to Sergei Dankvert, the head of Russian agriculture watchdog Rosselkhoznadzor, said that tests on sausages imported from the city of Linz in Austria found horse DNA.

"It came two days ago from Austria," Alexeyenko told AFP. "The shipment is over 20 tonnes," he said, adding that the enterprise that supplied the meat had been struck off the list of suppliers.

The contaminated meat will either be destroyed or returned to the supplier, he added.

Horsemeat is a traditional delicacy in Russia and can be found in many restaurants and stores across the country.

Alexeyenko said the problem with the contaminated meat was that it was not clear what it was made of.

"We are talking about adulterated meat products containing horsemeat," he said.

"The source of this meat is unknown," he noted, adding that old ill animals could have been used to make it.

- AFP/al

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Ubuntu Touch OS heading to slew of smartphones, tablets

The Ubuntu Touch home screen on a tablet.

(Credit:
Ubuntu/Canonical)

The Ubuntu Touch operating system is being ported to more than 20 types of smartphones and tablets.

The developer preview of the Linux-based OS was released for the Galaxy Nexus and
Nexus 4 smartphones and
Nexus 7 and
Nexus 10 tablets last week.

And developers are working to port the OS to a far greater range of devices, including the Asus Transformer series, HTC One handsets, the LG Optimus 4x HD, the Motorola Xoom, the Samsung Galaxy Note and S series, and Sony Xperia phones. They're also working on ports for the Nexus S and Nexus One devices.

The work to adapt the OS is being carried out as part of the Ubuntu port-a-thon initiative to get the developer community to bring Ubuntu Touch to a wider range of hardware.

"We want to port Ubuntu Touch to all kinds of devices," says the porting guide for Ubuntu Touch.

"If you have experience in porting code to Android devices or are generally knowledgeable in terms of porting, working with the kernel and other core bits and pieces of a distribution, this might be interesting to you."

The ports are at various stages of progress and though the OS reuses some of the drivers and other hardware compatibility code used by Android, it will likely take some time to get each port in working order.

Users have been warned not to use the developer preview as their primary OS, and the preview's release notes highlight various issues when running on Nexus devices.

These included problems when using the OS with some 3G and 4G networks, such as CDMA and LTE, and the possibility that the Nexus 4 would refuse to boot if the battery was drained.

This story originally appeared on ZDNet under the headline "Ubuntu Touch prepped for 20+ smartphones and tablets."

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At least 19 tourists die in balloon crash in Egypt

Updated 9:02 a.m. EST

LUXOR, Egypt A hot air balloon flying over Egypt's ancient city of Luxor caught fire and crashed into a sugar cane field on Tuesday, killing at least 19 foreign tourists, a security official said. The death toll rose Tuesday afternoon after a British tourist died of his injuries.

It was one of the worst accidents involving tourists in Egypt and is likely to push the key tourism industry deeper into recession.

The casualties included French, British, Belgian, Hungarian, Japanese nationals and nine tourists from Hong Kong, Luxor Governor Ezzat Saad told reporters.

Three survivors of the crash -- two British tourists and one Egyptian -- were taken to a local hospital. Local media reports said the pilot was among the survivors. One of the British tourists eventually succumbed to his injuries.

According to the Egyptian security official, the balloon was carrying at least 20 tourists and over Luxor when it caught fire, which triggered an explosion in its gas canister. It then plunged at least 1,000 feet from the sky.

The balloon crashed into a sugar cane field outside al-Dhabaa village just west of Luxor, 320 miles south of Cairo, said the official, speaking on condition of anonymity because he was not authorized to talk to the media.

Egyptians inspect the site where a hot air balloon exploded over the ancient temple city of Luxor on February 26, 2013.

/

STR/AFP/Getty Images

Bodies of the dead tourists were scattered across the field around the remnants of the balloon. An Associated Press reporter at the crash site counted eight bodies as they were put into body bags and taken away. The security official said all 18 bodies have been recovered.

The official said foul play has been ruled out.

Egypt's civil aviation minister, Wael el-Maadawi, flew to Luxor to lead the investigation into the crash.

The head of Japan Travel Bureau's Egypt branch, Atsushi Imaeda, confirmed that four Japanese died in the crash. He said two were a couple in their 60s and from Tokyo. Details on the other two were not immediately available.

In Hong Kong, a travel agency said nine of the tourists that were aboard the balloon were natives of the semiautonomous Chinese city. There was a "very big chance that all nine have perished," said Raymond Ng, a spokesman for the agency. The nine, he said, included five women and four men from three families.

They were traveling with six other Hong Kong residents on a 10-day tour of Egypt.

Ng said an escort of the nine tourists watched the balloon from the ground catching fire around 7 a.m. and plunging to the ground two minutes later.

In Britain, tour operator Thomas Cook confirmed that two British tourists were dead and two were in hospital.

"What happened in Luxor this morning is a terrible tragedy and the thoughts of everyone in Thomas Cook are with our guests, their family and friends," said Peter Fankhauser, CEO of Thomas Cook UK & Continental Europe.

"We have a very experienced team in resort with the two guests in the local hospital, and we're providing our full support to the family and friends of the deceased at this difficult time," he said.

In Paris, a diplomatic official said French tourists were among those involved in the accident, but would give no details on how many, or whether French citizens were among those killed.

Speaking on condition of anonymity because he wasn't authorized to be publicly named according to government policy, the official said French authorities were working with their Egyptian counterparts to clarify what happened. French media reports said two French tourists were among the dead but the official wouldn't confirm that.

Hot air ballooning, usually at sunrise over the famed Karnak and Luxor temples as well as the Valley of the Kings, is a popular pastime for tourists visiting the area.

The site of the accident has seen past crashes. In 2009, 16 tourists were injured when their balloon struck a cellphone transmission tower. A year earlier, seven tourists were injured in a similar crash.

Egypt's tourism industry has been decimated since the 18-day uprising in 2011 against autocrat leader Hosni Mubarak and the political turmoil that followed and continues to this day.

Luxor's hotels are currently about 25 percent full in what is supposed to be the peak of the winter season.

Scared off by the political turmoil and tenuous security that has followed the uprising, the number of tourists coming to Egypt fell to 9.8 million in 2011 from 14.7 million the year before, and revenues plunged 30 percent to $8.8 billion.

Poverty swelled at the country's fastest rate in Luxor, which is highly dependent on visitors to its monumental temples and the tombs of King Tutankhamun and other pharaohs. In 2011, 39 percent of its population lived on less than $1 a day, compared to 18 percent in 2009, according to government figures.

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'93 WTC Bombing Crushed Lives, Not Memories

Edward Smith remembers vividly the call from the morgue 20 years ago today, that his pregnant wife had died in the World Trade Center bombing hours before she was supposed to start her maternity leave.

"It seems like kind of yesterday sometimes," he told ABC News, "but it seems like a long time ago, too."

Today marks the 20th anniversary of the 1993 WTC bombing, which was overshadowed eight years later by the 9/11 attacks. Six people died and about 1,000 were injured after terrorists detonated a truck bomb in the parking garage of the World Trade Center's North Tower Feb. 26, 1993.

Four of the six killed -- Robert Kirkpatrick, 61, Stephen A. Knapp, 47, William Macko, 57, and Monica Rodriguez Smith, 35 -- were employees of the Port Authority of New York and New Jersey, which owned the buildings. John DiGiovanni, 45, a dental-supply salesman visiting the World Trade Center, and Wilfredo Mercado, 37, a purchasing agent for Windows on the World restaurant, also died.

To commemorate the event, ABC News spoke with several people affected by the bombing -- a widower, a former Port Authority executive director, a plaintiff's attorney and a jury foreman -- to illustrate how the bombing resonates 20 years later.

EDWARD SMITH: Husband of pregnant Monica Rodriguez Smith, who died in the bombing.

Edward and Monica Rodriguez Smith on their wedding day, Aug. 31, 1990.

September 11: World Trade Center Time Lapse Watch Video

Edward Smith, 50, remembers where he was Feb. 26, 1993, when he heard the news.

"I was up in Boston, and I had heard there was a fire at the [World] Trade Center," Smith told ABCNews.com last week. "I turned the TV on, and eventually heard there was an actual bombing, and drove down as quickly as I could."

Smith said he couldn't reach his wife, Monica Rodriguez Smith, a secretary for a mechanical supervisor for the Port Authority of New York and New Jersey who worked in the World Trade Center, for "hours and hours."

He said he didn't hear from her or anything about her until he contacted the New York City morgue at 11:30 p.m. that evening.

"Obviously, I was informed that I should come there," Smith said.

He and his wife had been married for a little more than three years, he said, and Feb. 26 was to be Monica's last day of work before she went on maternity leave. They were expecting their first child, a boy, to be named Eddie.

"She had worked at the Port Authority for at least 12 years," Smith said. "And she had just gotten an award for never having a sick day. That was a little thing you remember."

Smith said the World Trade Center was where he met his wife the first time.

"I was a sales guy, selling to the Port Authority, and she was the admin [secretary] for one of the guys," he said. "For the first two years, she wouldn't go out with me.

"She said, 'Do you know how many knuckleheads come in here and ask me out? What makes you different?'" Smith recalled Monica's saying.

It took her two years to go out on a date with him, Smith said.

The couple tied the knot Aug. 31, 1990. Smith said he even bought the house in which he grew up on Long Island to raise their family.

But after the events of Feb. 26, 1993, Smith said, it was hard to stay in New York. Shortly after the bombing, he moved to Arizona and later to California.

"There were too many reminders, it was too much," he said.

Smith now resides in Phoenix, but makes a trip to New York every year for the memorial in February.
This year is no exception.

"It's kind of an interesting feeling," he said of the 20-year anniversary. "It seems like kind of yesterday sometimes, but it seems like a long time ago, too."

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Italy faces post-vote stalemate, spooking investors

ROME (Reuters) - The Italian stock market fell and state borrowing costs rose on Tuesday as investors took fright at political deadlock after a stunning election that saw a comedian's protest party lead the poll and no group secure a clear majority in parliament.

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

In a sign of where that might lead, former prime minister Silvio Berlusconi indicated his center-right might be open to a grand coalition with the center-left bloc of Pier Luigi Bersani, which will have a majority in the lower house thanks to a premium of seats given to the largest bloc in the chamber.

Results in the upper house, the Senate, where seats are awarded on a region-by-region basis, indicated the center-left would end up with about 119 seats, compared with 117 for the center-right. But 158 are needed for a majority to govern.

Any coalition administration that may be formed must have a working majority in both houses in order to pass legislation.

Comedian Beppe Grillo's anti-establishment 5-Star Movement won the most votes of any single party, taking 25 percent. He shows no immediate inclination to cooperate with other groups.

Despite talk of a new election, the main established parties seem likely to try to avoid that, fearing even more humiliation.

World financial markets reacted nervously to the prospect of a stalemate in the euro zone's third largest economy with memories still fresh of the crisis that took the 17-member currency bloc to the brink of collapse in 2011.

In a clear sign of worry at the top over what effect the elections could have on the economy, Prime Minister Mario Monti, whose austerity policies were repudiated by voters, called a meeting with the governor of the central bank, the economy minister and the European affairs minister for later on Tuesday.

Other governments in the euro zone sounded uneasy. Allies of German Chancellor Angela Merkel made no secret of disappointment at Monti's debacle and urged Rome to continue with economic reforms Berlin sees as vital to stabilizing the common currency.

France's Socialist finance minister also expressed "worry" at the prospect of legislative deadlock in Italy but said that Italians had rejected austerity and hoped Bersani's center-left could form a stable government to help foster growth in Europe.

INSTABILITY

Fabio Fois, an economist at Barclays bank, said: "Political instability is likely to prevail in the near term and slow the implementation of much needed structural reforms unless a grand coalition among center-left, center-right and center is formed."

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 technocrat summoned to replace him in a crisis 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 more than four percent and the premium Italy pays over Germany to borrow on 10-year widened to a yield spread of 338.7 basis points, the highest since December 10.

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

Berlusconi, who was forced from office in November 2011 as borrowing costs approached levels investors feared would become unsustainable, said he was "not worried" about market reaction to the election and played down the significance of the spread.

The poor showing by Monti's centrist bloc reflected a weariness with austerity that was exploited by both Berlusconi and Grillo; only with the help of center-left allies did Bersani beat 5-Star, by just 125,000 votes, to control the lower house.

The worries immediately went beyond Italy's borders.

"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."

The euro skidded to an almost seven-week low against the dollar in Asia on fears about the euro zone's debt crisis. It fell as far as $1.3042, its lowest since January 10.

"NON-PARTY" SURGES TO THE TOP

Commentators said all Grillo's adversaries underestimated the appeal of a grassroots movement that called itself a "non-party", particularly its allure among young Italians who find themselves without jobs and the prospect of a decent future.

The 5-star Movement's score of 25.5 percent in the lower house was just ahead of the 25.4 percent for Bersani's Democratic Party, which ran in a coalition with the leftist SEL party, and it won almost 8.7 million votes overall - more than any other single party.

"The 'non-party' has become the largest party in the country," said Massimo Giannini, commentator for Rome newspaper La Repubblica, of Grillo, who mixes fierce attacks on corruption with policies ranging from clean energy to free Internet.

Grillo's surge in the final weeks of the campaign threw the race open, with hundreds of thousands turning up at his rallies to hear him lay into targets ranging from corrupt politicians and bankers to German Chancellor Angela Merkel.

In just three years, his 5-Star Movement, heavily backed by a frustrated generation of young Italians increasingly shut out from permanent full-time jobs, has grown from a marginal group to one of the most talked about political forces in Europe.

RECESSION

"It's a classic result. Typically Italian," said Roberta Federica, a 36-year-old office worker in Rome. "It means the country is not united. It is an expression of a country that does not work. I knew this would happen."

Italy's borrowing costs have come down in recent months, helped by the promise of European Central Bank support but the election result confirmed fears of many European countries that it would not produce a government strong enough to implement effective reforms.

A long recession and growing disillusionment with mainstream parties fed a bitter public mood that saw more than half of Italian voters back parties that rejected the austerity policies pursued by Monti with the backing of Italy's European partners.

Monti suffered a major setback. His centrist grouping won only 10.6 percent and two of his key centrist allies, Pier Ferdinando Casini and lower house speaker Gianfranco Fini, both of parliamentarians for decades, were booted out.

"It's not that surprising if you consider how much people were let down by politics in its traditional forms," Monti said.

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.

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.

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

(Additional reporting by Barry Moody, Gavin Jones, Catherine Hornby, Lisa Jucca, Steven Jewkes, Steve Scherer and Naomi O'Leary; Writing by Philip Pullella; Editing by Alastair Macdonald)

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