ROME Italian Prime Minister Silvio Berlusconi narrowly survived a no-confidence vote on Tuesday that left his center-right government clinging to power and provoked the most violent protests seen in Rome for years.
The result underlined Berlusconi's reputation as one of the great survivors of Italian politics, but left him unable to ensure the stability of his government at a time of major economic problems and a menacing euro zone debt crisis.
"It's obviously a positive outcome for Berlusconi given how things looked two weeks ago, but the government will face severe difficulties passing its policies with such a small and fractious majority," said Marco Stringa, an analyst with Deutsche Bank in London.
Some of the most serious rioting Rome has seen in recent times broke out after the vote, with dozens injured and more than 40 arrested as protestors threw smoke bombs and firecrackers and fought baton-wielding police in running street battles across the historic city center.
Stores along the main shopping street near the prime minister's office were forced to close as protesters, many wearing ski masks, overturned sidewalk restaurant tables, flower vases and parked motorcycles. Smoke rose from the Pincio Hill above the famed Spanish Steps.
Berlusconi said he would carry on and take steps to expand his government to include centrists and moderates, warning that talk of an early election would be damaging for Italy.
"An election campaign at this moment is something the country absolutely does not need," Berlusconi said at a book launch after the vote. "We have to show the international financial community we are a solid country."
The no-confidence motion brought by the center-left opposition was defeated by 314 votes to 311, and vote counting in the chamber was briefly interrupted by a scuffle between deputies from rival camps.
The result was secured after a fevered campaign of back room deals, in which opposition accusations of vote-buying and corruption have been answered by fierce denials and counter-accusations of treachery.
"This changes nothing, the government can't do anything. The political crisis has been made more dramatic by this outcome," said opposition Democratic Party leader Pier Luigi Bersani.
He called Berlusconi's two-and-a-half year old administration "clinically dead."
Financial markets had been watching the vote closely but took the result in their stride, as prospects receded of a lengthy and uncertain election campaign that could have disrupted management of Italy's strained public finances.
The stock market was little changed after the vote and the spread of Italy's 10-year BTP bond over the German Bund equivalent held steady at around 165.5 basis points.
Berlusconi has repeatedly defied skeptics, shrugging off a string of gaffes and scandals to win three elections and transform Italy's political landscape since he gained power for the first time in 1994.
But Tuesday's vote was the climax of one of his worst years in politics as his former dominance crumbled under corruption and sex scandals and a split with former ally Gianfranco Fini cost him a secure parliamentary majority.
With the no-confidence vote out of the way, attention now switches to the concessions he will have to offer to try to win support from smaller parties such as the centrist UDC and rebels on the center-right.
"I think there is the possibility of extending the majority that supports the government quite substantially," Berlusconi said, adding that he could work with centrists and even some from the center-left Democratic Party, but not with Fini.
On Monday, Berlusconi offered a broad electoral pact to "moderates" but his coalition allies in the Northern League, who play the role of government kingmakers, have expressed skepticism and have already talked about new elections.
"Today's result means the government doesn't have to resign. We'll look at things after we get back from the (Christmas) break to see if the conditions are there to keep going," said Interior Minister Roberto Maroni, a senior member of the Northern League.
Talk of new elections will keep the focus on public finances in Italy, which has one of the heaviest public debt burdens in the world, at almost 120 percent of gross domestic product.
Italy has largely escaped the euro zone debt storm thanks to tight control of spending and a conservative banking system that avoided excess during boom years. Markets were reassured last week when the 2011 budget was approved before the votes.
But Tuesday's result does not provide the secure majority investors want to see in the longer term.
(Additional reporting by Rome and Milan bureau; editing by David Stamp)