Berlusconi survives key vote but loses his parliamentary majority

The opposition immediately demanded Mr Berlusconi step down to calm financial markets that are running scared of the country’s economic problems.

The vote, on a routine measure to approve the 2010 state budget, won 308 for and none against in the Chamber of Deputies. But 321 deputies abstained, most of them from the centre-left opposition. If all 630 had voted, Mr Berlusconi would need a 316-seat majority to assure he was still in command.

Mr Berlusconi scrutinised the vote tally handed him right after the vote, apparently trying to figure out who had abstained.

“This government does not have the majority,” thundered opposition leader Pierluigi Bersani. “We all know that Italy is running the real risk in the next days to not have access to financial markets.”

He was referring to Italy’s borrowing rates, which have been soaring amid weeks of political uncertainty over Mr Berlusconi’s ability to continue to lead the country and oversee the adoption of austerity measures to fight Italy’s growing pile of debt.

The markets have turned their attention this week from the political crisis in Greece – where the two main parties were locked in talks to forge a national unity government – to Rome.

Mr Berlusconi’s government is under intense pressure to bring in quick reforms to shore up Italy’s defences against Europe’s debt crisis. However, a weak coalition and doubts over Mr Berlusconi’s ability to push through austerity and reforms have heightened the unease in financial markets that Italy could need financial aid.

Italy is the eurozone’s third-largest economy. With debts of around £1.6 trillion it is considered by many in the markets as being too big for Europe to bail out.

Higher rates would make it more difficult for Italy to roll over its debts and would mean servicing that debt would consume more and more of national income.

The yield on Italy’s 10-year bonds was up 0.07 per cent at 6.60 per cent, down from an earlier high of 6.74 per cent. A rate of over seven per cent is considered unsustainable and proved to be the trigger point that forced Greece, Ireland and Portugal into accepting the need for financial bailouts.

Meanwhile Asian stock markets struggled yesterday as European shares advanced. Benchmark-grade oil hovered near $96 per barrel, while the dollar fell against the euro and the yen.

Stocks in Europe gained. In London the FTSE 100 rose 56.52 to close at 5567.34 while Germany’s DAX finished 32.76 higher at 5961.44 and France’s CAC-40 added 39.70 to close at 3143.30.

Early trading on Wall Street was flat with the Dow Jones industrial average down 33.83 points to stand at 12,034.56, a fall of .28 per cent. The Standard & Poor’s 500 Index was down 0.97 point, or 0.08 per cent, at 1,260.15. The Nasdaq Composite Index was down 0.60 points, or 0.02 per cent, at 2,694.65.

In Asia earlier in the day, stocks struggled to make headway. Japan’s Nikkei 225 index fell 1.3 per cent to close at 8,655.51, and South Korea’s Kospi swung into negative territory midday to close 0.8 per cent down at 1,903.14.

Hong Kong analyst Francis Lun said Greece’s willingness to implement changes had helped some markets to eke out slight gains.

“I think Europe managed to temporarily solve the problem,” he said. “Investor confidence has been restored. They went bargain-hunting.”

Bernard Ingham: Page 13.