Italian confidence vote called as debate rages

The vote of confidence in the Italian government has been officially called. It is still unclear whether Silvio Berlusconi himself will back the government, but what is clear is that a significant part of his party will vote for prime minister Letta. The vote has not yet taken place and Berlusconi is not expected to speak in the debate.

In his second speech to the Senate, prime minister Letta said that his government could still function even with a reduced majority.

Our government can reach its objectives despite the fact that the majority's numbers have changed.

Managing director of Teneo Intelligence, Wolf Piccoli estimates the government will win the vote with 171 senators voting for the government, the number needed to win is 160. Despite the possibility of a new wave of elections in Italy some analysts believe that other factors such as the ECB and the situation in the US are currently of much greater concern to markets.

Richard Wiltshire, chief dealer foreign exchange at ETX Capital:

Mr Berlusconi’s party seemingly changing their minds randomly would only serve to confuse matters and whereas a positive outcome and the Government holding, should be positive for the Euro, I personally am not so sure that the market is paying too much attention, and is far more focused on the ECB and US situations.

Developments have come quickly throughout the day with the Guardian's southern Europe editor reporting that rebels in Berlusconi's PDL are even contemplating starting their own party named Popolari per l'Italia.