Berlusconi jeered after winning confidence vote

Italian premier scrapes though while his fragile coalition struggles to rescue failing economy

Italy's shambolic political situation looked set to continue last night after Silvio Berlusconi scraped through a parliamentary confidence vote, which only served to underline the fragility of his right-wing coalition.

After days of rising political tension the government won the vote by 316 votes to 301, after dire warnings from the 75-year-old Prime Minister that Italy would be thrown into disarray if his government fell in the midst of a financial crisis.

But with economists and other European nations calling for decisive leadership in Italy, it is now up to Mr Berlusconi's tottering coalition, riven by in-fighting and dismissed as incompetent by business leaders, to show that it is strong enough to boost growth, slash debt and prevent the eurozone financial crisis escalating even further.

Before yesterday's vote the Italian press was already dismissive of Mr Berlusconi's ability to lead Italy out of the crisis. Of his pre-vote pep talk to parliamentary allies, an editorial in La Stampa newspaper said: "Not one new thought was expressed. Absolutely nothing. A complete vacuum. Berlusconi has by now become a factor that is immobilising and freezing Italian politics."

Three ratings agencies have downgraded Italy's public debt, citing the country's political gridlock and feeble growth. "With Mr Berlusconi still at the helm, there is nothing that Italy can do from within that will restore market confidence," said Sony Kapoor, managing director of Re-Define, an economic think-tank, shortly after the vote.

Mr Berlusconi had been forced to call yesterday's confidence vote after his government failed to pass a routine budget provision on Tuesday, partly because of poor organisation and partly because it has only a slim majority. The embarrassing setback may yet hold up parliamentary business on vital budget legislation.

The barely concealed animosity between the Prime Minister and his Finance Minister, Giulio Tremonti, is adding to market jitters. Earlier this month it was widely reported that Mr Tremonti told Mr Berlusconi: "Silvio, don't you understand? You're the problem," when the premier asked how his government might beat the speculators.

The fate of the Berlusconi premiership is bound to the whims of its populist junior coalition ally, the Northern League. The League's leaders are increasingly unhappy about being tarred by association with a scandal-struck Prime Minister. But senior figures in the anti-immigration party are also reluctant to pull the rug and lose high-profile cabinet posts, including that of interior minister. Nonetheless, few observers believe the government will last a full term – until 2013.

Despite the slew of scandals engulfing Mr Berlusconi, and his administration's dismal economic record, the fractured centre-left opposition has still failed to make a breakthrough in the polls. And in yesterday's confidence vote the opposition was reduced to desperate tactics, including withholding its votes initially, in the vain hope that the chamber might not be quorate.

Mr Berlusconi said after the vote that the opposition "had made fools of themselves". But when he left the lower house he was met by young protesters who threw eggs and shouted "shame" at him.