Reuters International

Rome's newly elected mayor Virginia Raggi, of 5-Star Movement, gestures during a news conference in Rome, Italy June 20, 2016. REUTERS/Remo Casilli

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By Crispian Balmer and Gavin Jones

ROME (Reuters) - Italian Prime Minister Matteo Renzi was trounced by the anti-establishment 5-Star Movement in weekend local elections in Rome and Turin, clouding his chances of winning a do-or-die referendum in October.

The result represented a major breakthrough for 5-Star, which feeds off popular anger over widespread corruption, with the party's Virginia Raggi, a 37-year-old lawyer, making history by becoming the first woman mayor in the Italian capital.

"A new era is beginning with us," said Raggi, who won 67 percent of the vote in the run-off ballot. "We'll work to bring back legality and transparency to the city's institutions."

As a consolation for Renzi, his centre-left Democratic Party (PD) held on to power in Italy's financial capital, Milan, and in the northern city of Bologna, beating more traditional, centre-right candidates in both places.

Renzi has said he would not step down whatever the results on Sunday. Instead, he has pinned his future on the referendum on his constitutional reform that, he says, will bring stability to Italy and end its tradition of revolving-door governments.

But the losses in Rome and Turin suggest he might struggle to rally the nation behind him, with opposition parties lined up to reject his reform and even his own PD divided over the issue.

The prime minister took office in 2014 promising to revitalise Italy, but he has struggled to boost economic growth and create jobs after years of stagnation. He has also been hurt by repeated scandals in the banking sector.

Party bigwigs stayed off TV screens on Sunday night as they tried to digest the results, but the PD said in a statement the vote had "national indications" that would be discussed at a special meeting of party leaders on Friday.

"The run-off results in Rome and Turin were a clear and unqualified defeat for PD candidates," the statement said.

PD Vice President Matteo Ricci said on Monday the party would have to carry out a "profound analysis" of the results and "reorganise" itself, particularly at the base.

"We need a stronger, more structured party, with a more visible leadership that helps Renzi," he said, alluding to the PD's internal divisions.

The PD's defeat in Rome had been expected after widespread criticism of its management of the city over the past three years, with its mayor forced to resign in 2015 in a scandal over his expenses.

But the loss in Turin, a centre-left stronghold and home of carmaker Fiat, was a major shock. The incumbent, Piero Fassino, a veteran party heavyweight, was swept aside by 5-Star candidate Chiara Appendino, 31, who overturned an 11-point gap after the first round to win 55 percent of the vote.

"It will be difficult (for the PD) to downplay what happened," wrote Massimo Franco, leading political commentator for the Corriere della Sera newspaper.

The vote clearly would exacerbate party divisions and weaken Renzi's dominant position, Franco said.

BROADER APPEAL

Five-Star was founded seven years ago by comedian Beppe Grillo and has so far controlled just a handful of medium-sized towns. Success in Rome and Turin could prove a springboard to victory in national elections due in 2018.

The fiery Grillo, 67, has retreated from front-line politics over the last 18 months, making way for a generation of young leaders who have given 5-Star a more moderate image and broader appeal.

Five-Star's protests against rampant corruption in Italian public life remains its chief asset. However, analysts say it has outgrown its image as purely a party of protest and its proposals are now also being taken seriously.

These include universal income support for the poor, tougher penalties on white collar crime and tax evasion, closing down or privatising many publicly owned companies and cutting taxes for small businesses.

Some 8.6 million people, around a fifth of the total electorate, were eligible to vote on Sunday in run-off ballots for mayors of 126 towns and cities where no candidate won more than 50 percent of the vote in a first round of voting.

The centre-right was locked out of the top five cities up for grabs for a second election running as it struggles to find unity and strong national leaders. However, the bloc did manage to wrest the northeastern city of Trieste from the centre-left.

Across the country, turnout fell sharply, signalling growing disenchantment with politics. Just 50.5 percent of those eligible to vote went to the polls, against some 60 percent two weeks ago.

(Writing by Crispian Balmer and Philip Pullella; Editing by Crispian Balmer and Mark Bendeich)

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