Toward Another Eurocrisis?

This week in Italy, the populist Five Star Movement and right-wing League party's attempt to form a government initially collapsed when President Sergio Mattarella rejected the coalition's Euroskeptic nominee to head the ministry of economy and finance. With the populists having now satisfied Mattarella’s concerns, is Italy heading for a break with the eurozone?

In this Big Picture, Harold James explains how Italy's populists might bring their country – and the European Union – to the cliff's edge by deploying a "madman strategy" of diplomacy. And even if the new government does not use brinkmanship to extract concessions from the EU in the near term, Nouriel Roubini and Brunello Rosa explain why an “Italexit” could grow more likely over time.

Meanwhile, Lucrezia Reichlin delves into the economic factors underlying the crisis, and points a finger at Italy's broken growth model. And Carmen Reinhart shows how Italy's massive sovereign debt has compounded its economic problems and made the current situation all the more dangerous.