The political upheaval of a new government in Italy — led by a partnership of leftwing and rightwing populists, one strong in the south, the other in the north — has given Brussels the jitters. The question on everyone's lips is whether the new government will trigger an economic crisis and, if so, what might follow?
This mess is the fault of both Italy and the EU, writes Martin Wolf in his column. Italians are detached from the EU and contemptuous of its establishment. They also feel they have been abandoned to cope with their migration crisis by themselves. Then there are economic concerns. Since the financial crisis, real GDP growth per head in Italy has been more sluggish than even in Greece. The result has been a spiral of populism, with unhappy voters leading to irresponsible promises from politicians, leading to bad outcomes.
Things could get worse, warns Martin. The new government could continue with its dangerous policies, triggering a run on Italian debt and banks. From there, it doesn't take too many leaps of imagination to see the country effectively crashing out of the eurozone. That would be a monstrous crisis for Italy and the damage could take years to resolve.
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