Italy’s political crisis is the biggest threat to the euro so far

By Matt O’Brien

Italian President Sergio Mattarella (Fabio Frustaci/ANSA/AP)

Italy’s political crisis has brought Europe’s currency crisis back with a vengeance, and just about everything the establishment is trying to do to stop it is only making things worse.

The problem is, for the first time since all this started 10 years ago, Europe is facing the prospect of a country being led by a government that might genuinely want to leave the euro. The closest Europe had come to this before was three years ago when Greece’s far-left party Syriza threatened to do so as a bluff to try to win better terms on the country’s bailout package. It didn’t work.

Italy’s newly ascendant far-right party the League, though, doesn’t seem interested in mere concessions so much as freedom — the freedom to cut taxes and deport immigrants as much as it wants. Neither of those, of course, is allowed under Europe’s current rules. Which is why the League has played a double game where it’s said it doesn’t want to take the country out of the euro at the same time that it’s pushed policies and personnel that suggest otherwise.

Now, there are two things to understand about Italy’s dangerously dysfunctional politics. The first is that its mainstream parties have imploded under the weight of corruption scandals and an economy that hasn’t grown at all in the past 15 years, even when you account for the graying of the population.

The second is that its populist parties, which took the top two spots in the most recent elections, were just blocked by the head of state President Sergio Mattarella from forming the government that the League insisted on. He did that because he was worried that their choice of finance minister — a longtime euroskeptic named Paola Salvona who has said they need a “Plan …read more

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