The Economist

DURING the worst days of the euro-zone debt crisis, the fear was that bond-market turmoil in places such as Greece and Spain would spread to Italy. The biggest debtor in Europe would be too big to bail out, so Grexit might lead to Italexit and the break-up of the euro. Now the attention is focused directly on Italy itself.

In March half of Italian voters plumped for two populist parties that until recently favoured leaving the euro: the maverick Five Star Movement, which triumphed in the poorer south; and the xenophobic Northern League, which scored well in the richer north. Neither had fought the election campaign on a promise to leave the euro (the opposite, in fact). And as the two tried to form an all-populist cabinet, investors hoped that the sobering prospect of power, together with EU deficit rules and the behind-the-scenes influence of the Italian president, would allow Italy to keep muddling along.