Italian PM Letta survives key confidence vote: What's next for Italy?

What looked like an imminent political crisis has just been defused in Italy. As we anticipated in our previous posts (see here and here), Italian Prime Minister Enrico Letta has managed to survive a vote of confidence in the Senate - the upper chamber of the Italian parliament where his Democratic Party doesn't hold a majority.

In a last-minute U-turn, Silvio Berlusconi has decided that his party would support the government after all - turning a potential showdown into a mere formality. Nonetheless, what just happened in the Italian Senate does have consequences for the future of Italian politics. Here are a couple of thoughts.

1. Letta stays on, but uncertainty remains over what his government can deliver

The first, and most obvious, immediate consequence of today's vote is that Enrico Letta can stay on as Italian Prime Minister and maintains, at least on paper, his overwhelming parliamentary majority. However, it remains to be seen what Letta and his cabinet can deliver in terms of bold, concrete measures to get Italy going again - not least because some fundamental differences between the parties forming Italy's ruling coalition will remain.

One may argue that, faced with a party mutiny ahead of today's vote, Berlusconi would have finally learnt his lesson and would think twice before triggering new crises in future. But we wouldn't rule out new coalition rows. Berlusconi is famous for his CEO-style handling of his party, and he tends to take all the big decisions on his own - which makes him a very unpredictable coalition partner.    

Another important issue is: how long will Letta stay in office for? It's no secret that both him and Italian President Giorgio Napolitano would like the current government to continue at least until after Italy's rotating EU Presidency (July-December 2014) - and then perhaps go to early elections at the beginning of 2015. This would still be much earlier than 2018, when the current parliamentary term is supposed to end.

Questions will also remain over whether, if the crisis deepened once again, Italy would really be able to gain access to the ECB’s bond-buying programme, the OMT. As we mentioned above, Letta has clearly won the day - but uncertainty remains over his government's ability to push through unpopular measures.

Crucially, the ECB has made it clear that any country accessing the OMT must have a credible government in place to enforce the necessary conditionality attached to bond purchases (very likely to involve significant structural reform and budget cuts).

2. This is not the end for Berlusconi, but he's just been dealt a hard blow 

There's another reason why today's confidence vote is significant. Looking beyond the appearances (and the last-minute coup de théâtre) Silvio Berlusconi has, in substance, seen his plan to bring Letta's government down disrupted by a rebellion from within his own party. Last weekend's decision to pull his ministers out of cabinet has therefore proved a miscalculation, and will have at least two consequences:

• Berlusconi's threats to bring the government down if he's voted out of parliament as a result of his recent tax fraud conviction are no longer credible; 

• 25 senators from Berlusconi's party have this morning announced the creation of a breakaway group in the Italian Senate, irrespective of how the rest of the party would have voted. Though far from certain at this stage, today's defectors may well decide to follow up and quit Berlusconi's party - which in turn may reduce Il Cavaliere's electoral strength.

Berlusconi has shown his resilience several times, so we are unlikely to be witnessing the end of his political career just yet - even after he's ousted from parliament. Let's not forget that polls suggest he maintains quite large public support, with the help of his control over a large swathe of the media. We wouldn't expect him to take this challenge lying down. That said, his leadership of Italy's centre-right forces has today unequivocally been put into question.

These are our preliminary thoughts. We'll continue monitoring the situation in Italy very closely, so keep following us on Twitter @OpenEurope and @LondonerVince for all the updates.

Italy: A new (and unexpected) ally on EU reform for David Cameron?

Italian Prime Minister Enrico Letta has probably made a lot more friends than he expected on his first official visit to the UK. This is largely due to a couple of quite sensible remarks he has made about the future of Europe and Britain's role in it.

Asked by the BBC's Gavin Hewitt about the UK returning significant powers from Brussels, Mr Letta said, 

"It can be possible and it could be useful for us too...We need a more flexible Europe...We can have a new [EU] treaty negotiation for the UK to have a different link, but remaining on board, and for Italy or other countries in the euro to have a more integrated eurozone."

He was even more specific during the joint press conference with David Cameron earlier today,

"I think it will be possible to have a common very near future in which we can have [EU] treaty changes for having a more flexible Europe in the interests of the UK, but also in the interests of Italy and the euro area countries."

This certainly challenges the assumption that there's no appetite for major treaty changes across Europe.

Meanwhile, in a piece for the Guardian's Comment is Free, Mr Letta also argued,

"Greater integration in the eurozone should not challenge the integrity of the single market or leave countries outside the eurozone less comfortable with their membership of the [European] Union...We need to reshape the Union, so that it can accommodate the interests of countries which want to move forward towards greater political and economic integration, and countries which prefer a co-operation around the single market."

Furthermore, during the joint presser, Mr Letta repeated several times that the single market is "the main pillar" of the EU because, unlike the single currency, it is shared by all 28 member states.

This is music to David Cameron's ears. Italy is traditionally one of the most pro-integration EU member states, and while Mr Letta believes in the 'United States of Europe', the fact that he also acknowledges the need to make the EU "more flexible" is potentially significant. It means that more integration in the eurozone, if that is what happens, is not incompatible with a more flexible, looser relationship for other countries outside the single currency.

As UK Foreign Secretary William Hague put it in his speech at Open Europe's summer reception last night,

"Change in the EU is worth fighting for and that change would not just benefit Britain but every country in the EU."

Well, the UK may just have found a new, and somewhat unexpected, ally in this fight.