Italy’s Letta Wins Confidence Vote as Berlusconi Backs Down

Italian Prime Minister Enrico Letta won confidence votes in parliament today after Silvio Berlusconi backtracked on a pledge to bring down the five-month-old government as his party showed signs of deserting him.

Letta won the support of the Chamber of Deputies, the lower house of parliament, where he has a solid majority. Earlier today in Rome, the prime minister was supported by 235 senators with 70 opposed. That followed by hours former Premier Berlusconi’s announcement that he would support the government, reversing an earlier pledge to oppose Letta.

Berlusconi said the decision was taken for the good of the country after a period of “internal strife” within his party. “Italy needs a government that can undertake institutional and structural reforms,” he said during a speech in parliament.

Letta called the confidence vote after Berlusconi pulled his ministers from the government Sept. 28, setting off a week of political turmoil. Cracks in Berlusconi’s People of Liberty party, or PDL, began to show when prominent figures including Deputy Premier Angelino Alfano said they’d vote for the government.

“Berlusconi might have been convinced by the extreme risks of internal division within his party,” Annalisa Piazza, an analyst at Newedge Group in London, said in an e-mailed note.

Berlusconi had repeatedly threatened to bring down the government if Letta’s Democratic Party voted to expel him from the Senate following his definitive conviction for tax fraud in August. A public hearing in a Senate committee on the matter is scheduled for Oct. 4.

Fragmented Parliament

Berlusconi, forced out as prime minister in 2011, brought down his successor, Mario Monti, in December 2012. The fragmented parliament elected in February has been incapable of enacting a program to pull Italy from its two-year recession.

This week’s crisis blocked the approval of economic measures including the delay of a planned VAT increase.

Stock and bonds rose as the political tensions threatening the euro region’s third-largest economy abated. The benchmark FTSE MIB index rose 0.7 percent, after yesterday rallying as much as 3.1 percent, while the yield on the Italian 10-year bond fell five basis points to 4.37 percent.

“Berlusconi is losing his grip on politics,” said Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen. “It seems like he doesn’t have the backing of his party anymore so it’s likely he won’t be as powerful in the future.”

Alfano Group

The turning point in the political struggle came late yesterday when Berlusconi ally Alfano broke away from his mentor saying he’d back Letta. Alfano is attempting to form a new group in parliament, Ansa news agency reported today after the Senate confidence vote.

Alfano “seems to come out of this experience strengthened,” PDL party Senator Sacconi said in an interview today after the vote. “Berlusconi is confirmed as a charismatic leader” and Alfano “is confirmed as the leader of the future.”

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