Five days after he offered his resignation, the Italian Prime Minister, Mr Romano Prodi, was yesterday back in government at the head of the same centre-left Olive Coalition that last Thursday seemed to have come to the end of the line, following the withdrawal of support by its ultra-left non-government ally, Rifondazione Communista. Ostensibly, the bone of contention last week between Mr Prodi's coalition and Rifondazione concerned the terms of the 1998 Finance Bill or budget, with Rifondazione objecting to $3 billion in welfare cuts.
Deprived of Rifondazione's support in the lower house, the Prodi government was effectively a dead duck. Italian participation in the start-up of European Monetary Union was, at the very least, seriously compromised.
Not only did Italy's European partners see the 1998 budget as a key factor in sustaining Italy's drive to meet the convergency criteria, but many observers were dismayed by the downfall of a government that in pushing through $58 billion in deficit-cutting measures had seemed to restore badly-needed credibility.
The Prodi government, too, has achieved impressive results, such as reducing inflation to a 30-year low of 1.4 per cent and reducing the budget deficit/GDP ratio from 6.8 per cent in 1996 to 3.0 per cent in 1997. With apt timing, the European Commission yesterday confirmed the 3.0 per cent figure for Italy in 1997, forecasting a 2.8 per cent result in 1998.
Following yesterday's formal agreement, both the centre-left Olive Coalition and Italian participation in the start-up of the Euro are back in business. Announcing what was effectively a face-saving agreement, Mr Prodi said: "In this crisis, there were no winners nor losers. Italy and good sense won."
The broad outlines of the agreement involve a commitment by Rifondazione to vote for the 1998 budget and to guarantee to work with the government to ensure Italian participation in EMU.
In return, the Prodi government has pledged to instigate legislation that will see the introduction of a 35-hour working week by the year 2001; not to cut pensions rights for a majority of blue-collar workers; and to reduce spending cuts contained in the budget by $290 million.
It would seem that Rifondazione and its leader, Mr Fausto Bertinotti, are the losers in this agreement. There was little in it that Mr Prodi had not publicly offered last week.
Mr Bertinotti seems to have badly miscalculated. His reasons for bringing down the government last week were related more to his party's survival than to the contents of the budget.
As Italy continues its difficult and uncertain progress towards a bipolar democracy, Mr Bertinotti's move last week seems to have been intended to strike a serious blow at the major party in the Prodi Olive Coalition, Democratic Left, or the PDS, the former Italian Communist Party from which his hardline grouping broke in 1991, when Rifondazione refused to follow it down the road of social democracy. Rifondazione may well fear being wiped off the political map by the PDS. Yesterday's resolution of this crisis has not removed that fear.
A nationwide negative reaction over the weekend from ordinary citizens, from almost the entire trade union movement and from the party's grassroots probably persuaded Rifondazione to change tack.
It was not insignificant that when Mr Bertinotti attended a peace march in the earthquake stricken Umbrian town of Assisi on Sunday, he was roundly booed and jeered by some of those present.
For the time being then, and at least until the end of 1998, Mr Prodi is back in the saddle. Many Europeans, Italian and otherwise, are breathing a large sigh of relief.