What to make of Berlusconi’s drastic change of heart? As analysts began publishing notes about what it means for Italy, stocks gradually gave away all of their gains. Italy will not face another rancorous election this year, but it remains governed by a coalition that includes the volatile Berlusconi, who clearly retains his flair for the dramatic.

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Is Letta better off with a slimmer majority that includes rebels from Berlusconi’s party but not the party leader himself? A brief rally at the end of the day pushed stocks back up, although to a lower level than the midday highs. (Bonds followed a similar pattern throughout the day.)

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A debate later this week will address whether Berlusconi should be expelled from parliament following his conviction for tax fraud. Even if the four-time former prime minister is ejected from parliament, it would be foolish to count him out. Berlusconi is a weakened political force, certainly, but there is little chance that the owner of huge swathes of the Italian media will simply fade into obscurity.

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