'Rome burns' as PM Letta wins confidence vote

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Italy's prime minister survived another vote of confidence on Wednesday – this time of his own making rather than due to a political crisis – but some have accused the government of "fiddling while Rome burns."

Italy's lower house passed the confidence vote by 379 to 212, and will now be voted on in the Senate later Wednesday.

The vote was called by the Prime Minister after Silvio Berlusconi, the leader of the "Forza Italia" party, pulled his support from the coalition government. It is designed to confirm Letta's new majority, the government said, and comes only a few weeks after the last vote of confidence on the country's 2014 budget.

Ahead of the vote on Wednesday morning, Letta told the Italian parliament that Italy must avoid "chaos" and that the country's priorities for 2014 were to cut Italy's public debt and deficit as well as reducing taxes on families and companies and boosting employment, Reuters reported.

That's easier said than done in a country with the second highest debt pile in the euro zone after Greece, at 133 percent of its economic output, a budget deficit hovering around the European limit of 3 percent and unemployment at a record high of 12.5 percent in October.

The prime minister also promised a reform package to boost growth on Wednesday. Italians have suffered the effects of more than two years of recession and a fragile coalition government that struggled to enact meaningful reforms due to political volatility.

Italy PM Letta 'stronger than ever'

Carlo Calenda, Italy's deputy minister for Economic Development, told CNBC that Italians are waiting, "and have been waiting for a long time" for a clear set of reforms and the 2014 agenda.

"I think now we have a very clear program in front of us but we need to move fast. As a government we have a lot to do, we have to facilitate foreign investment and this was put at the top of Prime Minister Letta's agenda," he told CNBC Europe's "Squawk Box" on Wednesday. "Now it's time to focus on competitiveness – but again, the industrial structure is going well, look at how we move on foreign markets."

(Read more: Berlusconi's gone - but Italy's big problems remain)

Indeed, investors have treated Italy benignly despite political volatility over the past year with its borrowing costs remaining stable throughout political upheavals, such as Berlusconi's withdrawal of support from the coalition.

One senior market analyst at CMC Markets reflected on the forthcoming vote: "Another vote – Yawn!" showing how normal Italy's dysfunctional politics have been perceived by financial markets.

"I think the market will interpret this for what it is – more white noise from Italian politicians reminding of another famous Italian who fiddled while Rome burnt," Michael Hewson warned.

(Read more: Italy's latest risk to stability: the 'Renzi Factor')

Rome might be burning politically but the wider economy might be on the path of recovery, if the latest economic data is anything to go by.

Third-quarter gross domestic product (GDP) data released on Tuesday showed that the economy did not shrink in the quarter as previously thought. For his part, Letta optimistically told the Italian parliament on Wednesday morning that the country was targeting 1 percent growth in 2014 and 2 percent in 2015.

Defending the country's apparent economic decline, Carmine Di Noia, deputy director general of the Italian association of Italian corporations, Assonime, said Italy looked worse than it actually was.

"We always see the bad side from abroad but there are many companies and sectors such as fashion -- particularly those that export where we are leaders. There is a lot of liquidity still going to Italy and that is why you see those [stable borrowing] rates that you shouldn't expect…Italy is improving a lot and maybe we are not as bad as we are perceived," he told CNBC on Wednesday.

(Read more: Italy threatens to roil euro zone's market calm)

There are hopes that now that Berlusconi is in the opposition and the "grand coalition" has become more of a hotch potch of center-left and center-right moderates, political and economic reforms might be passed more easily.

Deputy minister for Economic Development Calenda told CNBC that the government could now "move on" and that "the country was on the right track" .

But Bluford Putnam , chief economist at the CME Group, was not so convinced of the Letta government, despite Berlusconi's absence.

"Italy is really famous for a lot of really great, global brands and they've done really well exporting around the world but on the political side I can't quite as optimistic that a coalition government with as tenuous a hold on power can do much in the reforms sector."

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt