Clinching cross-party unity had proved tricky, with Letta’s Democratic Party (PD) loath to work with its hated rival Berlusconi.
“It’s a return to political reality. Everyone had to give way on something. There was no turning back to how things were before,” La Stampa political columnist Massimo Franco said.
The only alternative to a deal would have been fresh elections, which neither side would necessarily have won with the majority needed to govern — although recent opinion polls show that Berlusconi might have emerged victorious.
The new government is bound to bring some relief to anxious international observers, after the warning from ratings agency Moody’s on Friday of an “elevated risk” that the political stalemate would harm investor confidence.
Letta has promised to act fast on key reforms — such as tackling the complicated electoral law which created the deadlock in the first place — but the diverse make-up of the government and internal divisions within the PD may make his job more difficult.
Political analysts have warned that the coalition team may have a limited life of one-to-two years before bickering parties or rebel politicians bring it down and fresh elections are held.