By Crispian Balmer and Gavin Jones
ROME (Reuters) - The anti-establishment 5-Star Movement trounced Italian Prime Minister Matteo Renzi in local elections this weekend, clouding his chances of completing his term of office and winning a referendum he has called on constitutional reform.
Five-Star, which feeds off popular anger over widespread graft, won in 19 of the 20 towns or cities where it had advanced to the run-offs, including Turin and Rome, where Virginia Raggi, a 37-year-old lawyer, became the first woman mayor.
The party 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.
Protest parties have made inroads in a number of European countries and 5-Star's advances in Italy this weekend mean a major European Union capital will be governed by a party which wants Italy to drop the euro.
"A new era is beginning with us," said Raggi, who won 67 percent of the vote. "We'll work to bring back legality and transparency to the city's institutions."
As a consolation for Renzi, his center-left Democratic Party (PD) held on to power in Italy's financial capital, Milan, and in the northern city of Bologna, beating more traditional, center-right candidates in both places.
A magnanimous Renzi acknowledged 5-Star's "clear and undisputed" victories and said the PD would hold a "very real and very frank" discussion about the national and political implications at an executive meeting on Friday.
"I don't believe it was a protest vote. It was a vote for change," he told reporters in Rome, promising his government would collaborate with newly elected mayors from all parties.
Renzi has pinned his political future on an October referendum on 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 revitalize 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.
PD Vice President Matteo Ricci said the party would have to "reorganize" 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, which political commentators said would be exacerbated by the results.
The PD's defeat in Rome had been expected after 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 to 5-Star in Turin, a center-left stronghold and home of carmaker Fiat, was a major shock. The incumbent, Piero Fassino, a veteran party heavyweight, was swept aside by Chiara Appendino, 31, who overturned an 11-point gap after the first round to win 55 percent of the vote.
Comedian Beppe Grillo, 67, who founded 5-Star seven years ago, has mostly retreated from front-line politics over the last 18 months, making way for younger politicians who have given the protest party a more moderate image and broader appeal.
However, Grillo basked in his creation's success on Monday, saying 5-Star would "fly high towards national government."
The movement'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.
Its policies include universal income support for the poor, tougher penalties on white collar crime and tax evasion, closing down or privatizing many publicly owned companies and cutting taxes for small businesses.
Across the country, turnout fell sharply, signaling growing disenchantment with politics. Just 50.5 percent of those eligible to vote, or about 8.6 million people - about a fifth of the total electorate - went to the polls, against some 60 percent two weeks ago.
(Writing by Crispian Balmer and Philip Pullella; Editing by Richard Balmforth)