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FILE PHOTO: Lower house deputies are seen at the Chambers of Deputies in Rome March 15, 2013. REUTERS/Remo Casilli/File Photo


ROME (Reuters) - A deal struck among Italy's main political parties over a new electoral law has unraveled, a senior figure from the ruling Democratic Party (PD) said on Thursday after his group lost a parliamentary vote on a proposed amendment.

"The accord on the electoral law is dead," Emanuele Fiano, who presented the law being debated in the Chamber of Deputies, told reporters. He blamed the anti-establishment 5-Star Movement, saying they had "killed off" the deal.

Italian assets gained on signs the accord was failing, with government bond yields falling and stocks rising as investors bet the breakdown of the accord would reduce the risk of a snap election this year.

However, some politicians predicted that the row could make a vote in 2017 more likely, saying the government might decide to circumvent a divided parliament and introduce a new electoral system by decree.

Italy's main parties -- the PD, 5-Star, Silvio Berlusconi's Forza Italia and the right-wing Northern League -- agreed last week that they would all support a proportional representation system based on the German electoral model.

However, as soon as voting on the bill began in the lower house this week, the agreement began to look shaky. On Wednesday some 60 parliamentarians opposed it in secret ballots, with the PD and 5-Star blaming each other for the defections.

Fiano declared the deal dead on Thursday after an amendment, opposed by the PD, regarding elections in the autonomous northern region of Trentino Alto-Adige, was passed in a secret vote. PD lawmakers said the 5-Star had backed the measure.

Alessandro Di Battista, one of 5-Star's most prominent deputies, accused the PD of wanting to scupper the new electoral law and using the Trentino vote as a pretext.

"For us the pact is still valid, we are in favour of this bill," he told reporters.

Voting on the bill was suspended and the PD, Forza Italia and the Northern League convened meetings of their executive bodies to decide the next step.

The Northern League called for a new electoral law to be introduced by emergency decree so that a snap vote could be held, and PD spokesman Matteo Richetti also suggested it would be better to go to the polls quickly.

"If parliament ... can't agree on an electoral law it's hard to argue that the legislature can carry on," he said.

The legislature is due to end by May 2018.

(Reporting by Gavin Jones and Valentina Za; Editing by Crispian Balmer)

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The citizens' meeting

The citizens' meeting

The citizens' meeting