The result reinforced Berlusconi’s reputation as one of the great survivors of Italian politics but left him badly weakened, without the numbers in parliament to ensure stability at a time of big economic challenges and a menacing euro zone debt crisis.
Berlusconi’s survival was ensured with 314 votes against 311 in the lower house of parliament.
Vote counting after an acrimonious debate was briefly interrupted by a scuffle between deputies from rival camps.
Pier Luigi Bersani, head of the opposition Democratic Party, said Berlusconi’s survival was a Pyrrhic victory.
“You, prime minister are no longer in a position to govern,” he told parliament.
Riot police blocked off the centre of Rome and clashed with protesters who threw firecrackers and paint bombs at the Senate and oranges at the economy ministry.
After a year overshadowed by corruption and sex scandals and an acrimonious split with former ally Gianfranco Fini that cost him a secure parliamentary majority, the result offered at least a temporary lifeline to the 74-year-old premier.
Berlusconi has repeatedly defied sceptics, shrugging off a string of gaffes and scandals to win three elections and transform Italy’s political landscape since gaining power for the first time in 1994, but he has polarised Italians.
Thousands of students, workers and other government opponents staged other protests around the country on Tuesday.
Had Berlusconi lost in the lower house following a clear win in the Senate earlier on Tuesday, he would have had to resign, potentially opening the way to early elections more than two years before they are due in 2013.
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.
“GO TO ELECTIONS”
With the vote out of the way, attention now switches to the concessions Berlusconi will have to offer to centrists and rebels on the centre-right to secure a longer term alliance.
On Monday, Berlusconi offered to open up his government to moderates in a broad electoral pact but his coalition allies in the Northern League, who play the role of government kingmakers, have already expressed scepticism.
“Either there are the conditions for continuing in government with a solid majority or it would be better to go to an election,” Interior Minister Roberto Maroni, a senior member of the Northern League told reporters.
Tuesday’s vote was closely watched by financial markets on high alert over the euro zone debt crisis, and a prolonged period of doubt could turn the spotlight on Italy’s strained public finances.
“Political uncertainty will only be dissipated in case of a clear majority,” analysts from Italian bank UniCredit wrote in a research note before the key vote.
Italy has one of the heaviest public debt burdens in the world, at almost 120 percent of gross domestic product. But it has largely escaped the euro zone debt storm thanks to tight control of spending and a conservative banking system that avoided excess during the market boom.
Markets were reassured last week when the 2011 budget was passed in parliament ahead of the votes, but the vote does not provide the secure majority investors want to see and leaves the future of the government in doubt.
Former anti-corruption judge Antonio Di Pietro, who now heads the opposition Italy of Values party, said in parliament:
“Whatever the result of the vote you have bought, one thing is clear. You (Berlusconi) do not have a political majority that would allow you to govern.”
“Whether you like it or not, you have reached the end of the line for your political experience,” he said.