Italian Prime Minister Silvio Berlusconi won a crucial vote of confidence on Friday, giving his struggling center-right government a new, but probably short, lease of life.
Berlusconi, who said before the vote that the country would be thrown into economic and social catastrophe if his government collapsed now, won the vote 316 for and 301 against.
The result was in doubt until the last minute and even some center-right members expressed uncertainty and showed nervousness before the vote on whether the government would pull through.
The situation was so tense that some in the center-right went into last-minute horse-trading meetings with Berlusconi, who is trying to contain a rebellion in his coalition.
There was even doubt until the last minute if the quorum making the vote valid existed since most of the opposition boycotted the first round of the vote.
One coalition parliamentarian, Francesco Nucara, told the chamber he was voting to save the government for the good of the country but openly expressed dissent with the way Berlusconi was running the center-right and his choice of ministers.
The FTSE MIB was up 2 percent following the vote.
There are growing dissident voices within Berlusconi's own People of Freedom party. Santo Versace, brother of Donatella and the late Gianni Versace, quit the party last month and is now an independent member of the Chamber of Deputies, after a row over Berlusconi's Agriculture Minister Francesco Saverio Romano, who is under investigation for links to famous Sicilian Mafia group Cosa Nostra.
"There’s no credible alternative to this government and early elections wouldn’t be a solution to the problems we face," Berlusconi declared as he called for the vote in a speech to the Chamber of Deputies, which was boycotted by the main opposition parties. "With me is a politically cohesive majority to prove that Italy can make it, will make it and can relaunch itself by defeating the strategy of pessimism."
The announcement of the confidence vote, the second within a year for Berlusconi's government, spooked the markets.
After falling earlier this week, five-year Credit Default Swap spreads on Italian debt rose to 438 on Thursday afternoon, up from 426 on Wednesday's close. Italy’s 10-year bond yields hit 5.86 percent, their highest point since the European Central Bank started buying Italian bonds in August, on Thursday.
All of the three major ratings agencies, Fitch, Moody's and Standard and Poor's, have downgraded Italy's credit rating recently.
The FTSE MIB, the benchmark Borsa Italiana stock market index, fell 2.27 percent to 16,131.89 Thursday afternoon.
While there has been plenty of criticism of Berlusconi over his personal life, best described as colorful, his handling of Italy's economy, the third largest in the euro region, has caused most of the current dissent.
Italy is supposed to be embarking on an ambitious package of reforms, but analysis by Lavinia Santovetti, contributing economist at Nomura, suggests that hardly any of the measures suggested in the European Central Bank's July letter to the Italian parliament have been carried out.
"There has been little action (so far) on the structural reform agenda and fiscal correction is geared towards increasing revenue," she wrote in a research note.
"We feel the government has been effective so far in securing the prospects for the public finances (bringing the primary balance back to a surplus position), though we think the process is only halfway through," Fois wrote.
"To fully regain market confidence, we believe Italy must eliminate impediments to potential GDP growth."
The opposition to the Berlusconi-led government has not presented an organized front yet, Santovetti said.
"The idea of a post-Berlusconi era seems to be gradually gathering momentum, but it remains a leap in the dark, as yet," she said.
While there is a small Occupy Italy movement along the lines of the Occupy Wall Street protests, which is planning an action on Saturday to coincide with other October 15 movements such as Occupy the London Stock Exchange, there has not yet been any large-scale organized popular unrest.