"The real danger to Europe is the League."
"The 5-Star Movement would be the downfall of Italy."
Forget these words, which Italy's once-opposing populist parties had so recently deployed against each other during the election campaign. The anti-party 5-Star Movement (M5S) and the extreme-right League have now joined forces and even managed to forge a coalition agreement in a relatively short time. These populists are clearly more opportunistic than they are ideological. It is alarming that Italy, one of the EU's founding countries, has now fallen into the hands of the euroskeptics. But, deeply frustrated by the existing system, the majority of voters wanted it that way.
M5S party leader Luigi Di Maio described the partnership of convenience as a truly "historic" alliance. However, one hurdle must still be overcome: A prime minister has not been chosen, and the parties' leaders only have until Monday to reach an agreement. The legislative program that the parties have cobbled together is potentially very expensive. It includes the tax cuts promised to the League's constituency and the social services that had won voters over to the M5S. The aim is to make pensioners happy while boosting the economy. It is unclear how all this is supposed to be financed. A consolation for the European Union's budgetary wardens is that the new Italian government also intends to comply with the bloc's deficit rules. The hope remains that fiscal reality will give populist fantasies a healthy shock.
'First, the Italians'
At the moment, there is no reason to believe that the M5S and the League will follow the course that Greece's Syriza coalition took in 2015. The Italians have learned their lesson from the drama that followed the Greek government's efforts to allow citizens to vote on whether they would accept yet another round of harsh austerity measures. But both parties are demanding fresh negotiations on EU treaties and calling for the rules to be changed in Italy's favor. This will be a lengthy process that will affect all other policy areas.
The coalition has expressed its intent to close Italy's borders to displaced people. Party leaders want to deport hundreds of thousands of people, if necessary, to other EU countries. The nationalist League, which has links to far-right parties in France, Germany and the Netherlands, even campaigned on a Trump-style platform of "Italians First." This may turn out to be very unpleasant for the European Union's established politics in Brussels. From now on, the focus should stop being about whether Germany and France can push through their desired changes to the eurozone. What matters now is whether Italy, as the third-largest country to use the currency, will go along with things at all — or go in a completely different direction.
Both parties' main message in the election campaign was that the European Union is to blame for almost all of Italy's problems and should therefore pay up, even for the bad loans made by the country's many ailing banks. The new government in Rome could be tempted to create a kind of virtual parallel currency — one only valid to the tax authorities and Italian companies. With this trick, which is illegal according to EU regulations, the populists could try to minimize excessive debts. The interesting question is whether international financial markets, which have so far watched the historic upheaval with astonishing composure, will remain so relaxed. Interest rates on Italian government bonds have already risen slightly, but are still within the usual range. Before the election, investors feared the prospect of a populist coalition. Now the nightmare is becoming reality. How long will this go on?
In foreign policy terms, Italy's coalition could also become a nightmare for EU officials. Both the M5S and the League have excellent relations with the Kremlin. Both of them are firmly behind Russian policy. And both vehemently reject EU sanctions on Russia. Against this backdrop, there will be a change in Italy's position on the war in Syria. A euroskeptic, pro-Russian, economically adventurous coalition of anti-establishment politicians in Rome points to a wild ride ahead for the European Union — one truly historic, dangerous and exciting to the extreme.
How long this alliance will last is another question. If new elections are held sometime next year, the political zombie Silvio Berlusconi is likely to rise once more. The experienced puppet master could make trouble for the populists. Italians would then be left with a choice between a great evil, Berlusconi's Forza Italia, and a very great evil: the current coalition.