If Italy’s government tames its radical instincts it could be allowed to get away with a few things. But if it is confrontational with the EU it will be heading for trouble.
The EU no longer lives in the orderly world of the Maastricht treaties, but in the world of a “populist monetary union.”
The new Italian government seems keen to play blame games – and pursuing economic solutions that have already failed conclusively in the past.
If a radical government in Rome plunges Italy into a deep crisis, it would still be an Italian crisis — rather than a “euro“ crisis.
A controlled unwinding of the euro might offer material economic benefits to many members of the Eurozone.
The saga of a dynamic Germany and a sclerotic Italy does not reflect the historical record.
France and Germany will be very flexible in their response to Italian demands, irrespective of the official rhetoric from Berlin and Paris.
Populists in power, like Five Stars and the Lega in Italy, can do serious damage. In the case of Italy, the key risks are long-term rather than immediate.
Though the populists have triumphed in Italy, examples show that populists often abandon their most dangerous demands and their euro scepticism in the pursuit of power.
To advance their prospects of finding partners, both 5Star and Lega have ditched the most dangerous part of their erstwhile agenda. But significant risks remain.