I Am Not Sure Who Blinked Here

After panic in the bond markets, 5 Star and the League will be forming a government in Italy:

After 88 days of impasses and negotiations, two Italian populist parties with a history of antagonism toward the European Union received approval Thursday night to create a government that has unsettled the Continent’s political order and promises a sweeping crackdown on the illegal immigration that helped fuel their ascent.

Only days ago, President Sergio Mattarella of Italy rejected a populist government over concerns about a proposed finance minister who had helped write a guide for withdrawing Italy from the euro, Europe’s single currency. The political chaos and sudden uncertainty about the euro helped send global financial markets reeling.

On Thursday, the populists reshuffled, keeping the same prime minister, Giuseppe Conte, and other top players, but moving the objectionable finance minister to a less critical post.

I would note that the “Objectionable” former pick for FM, Paolo Savona, is a former member of the Bank of Italy who pioneered econometric models of the Italian economy, so he was clearly qualified.

The issue here was his philosophy, not competence.

That was apparently enough to satisfy the president, who preferred an elected government to a caretaker alternative he had in reserve. The populist parties constituting the new government won the most votes in a March 4 election.

I tend to think that the general freakout over snap elections, and talk of impeaching Mattarella, had more to do with this than any profession of devotion to the Euro by the now incoming government.

The cabinet still included the minister blocked by President Mattarella — Paolo Savona, the euro-skeptic economist. But Mr. Savona has now been moved from the powerful finance ministry to the less consequential European affairs ministry.

He will nevertheless be Italy’s representative in Brussels, a key spot for a coalition that wants to change the rules of the European Union.


In a retort to the European Commission president, Jean-Claude Juncker, who suggested that Italians must work harder and be less corrupt, Mr. Salvini made clear that the days of Italy going “hat in hand” to Brussels were over.

Fasten your seat belts, we are in for a bumpy ride.

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