Italy's Silvio Berlusconi today abandoned his bid to topple the government, voting for a confidence vote in a humiliating climbdown after key allies rebelled against his leadership.
"We have decided to vote for confidence, not without internal disputes," Berlusconi said before the vote in parliament called after he launched his challenge to the leadership on Saturday.
Berlusconi said he had changed his mind after hearing Prime Minister Enrico Letta's promise to lower taxes and mindful of the need for reforms.
Letta, who had been tipped to win with just a handful of votes just minutes before Berlusconi's U-turn, ended up sweeping the vote with a crushing majority of 235 senators in favour and 70 against.
The surprise about-turn made victory for Letta's coalition a certainty and was immediately cheered by the markets, with shares in Milan jumping 1.45 per cent higher after the shock announcement.
The difference between rates on Italian 10-year government bonds and benchmark German ones -- a measure of investor confidence -- also narrowed to 253 basis points from 260 points yesterday.
Letta shook his head as Berlusconi, who has dominated political life for much of the past two decades but has been on the decline, was speaking and the address was followed by stunned silence.
Giacomo Marramao, a politics professor at Roma Tre university, said the result showed a "decline in credibility" and signalled a split in Berlusconi's centre-right People of Freedom (PDL) party.
"I think we are seeing the final chapter of Berlusconi's political life," Marramao told AFP.
Letta had earlier asked lawmakers to vote for him, saying Italians were tired of "blood in the arena".
"Italy runs a risk that could be a fatal risk. Seizing this moment or not depends on us, on a yes or a no," Letta said in his address to the Senate.
"This is an historic situation," he said.
Several key figures from Berlusconi's PDL broke ranks with the billionaire media mogul after his decision to call time on the government and pull his ministers from the cabinet last weekend.
Letta immediately condemned the move as "crazy and irresponsible" and Interior Minister Angelino Alfano, national secretary of Berlusconi's party and his chief protege, reacted by saying he would be "pro-Berlusconi in a different way".
