This political earthquake will shake the old European hegemony to its foundations

Italian voters have swept away their country’s pro-european establishment after 70 years of unbroken rule, marking a revolutionary turn in Europe’s post-war history. Populist parties of Left and Right command the political landscape of a major eurozone state for the first time, vowing openly to defy EU fiscal rules, banking codes, and migrant policies. Both wings have

pledged to roll back reforms forced on Italy by the European Commission and the European Central Bank. Both are committed to manifestos that put them on an unstoppable collision course with the Franco-german hegemony.

Economic recovery has come too late to reverse the political legacy of economic depression and austerity overkill. Youth unemployment above 50 per cent across the southern Mezzogiorno – a level once thought morally unthinkable in a modern democracy – was tolerated by Europe’s policy class for too long and too lightly.

Even today, Italy’s GDP is still six per cent below its pre-lehman peak in 2007. Benito Mussolini did better in the Thirties. “The euro is and remains a failure,” was the opening salvo of Matteo Salvini, triumphant leader of populist Lega. “It is clear in our minds that the system of monetary union is destined to end, and therefore we wish to prepare for that moment.”

He warned the global “bond vigilantes” and Europe’s political leaders that a newly sovereign Italy will not again be cowed into submission.

“We couldn’t give a damn about bond spreads. It is ‘No’ to Berlin, ‘No’ to Paris, and ‘No’ to Brussels: Italians are going to decide for Italy from now on,” he said.

Mr Salvini claimed first right to form a government as top vote-winner of the centre-right coalition bloc, lifting his party’s tally from four per cent to 18 per cent by reinventing the northern separatist movement as the scourge of “delinquents and parasites” and the voice of pan-italian identity.

If the Right takes power, it will almost certainly push for an end to EU sanctions against Vladimir Putin’s Russia, and has vowed a change in the Italian constitution stipulating that Italian law must have primacy over EU law.

This “Karlsruhe clause” would de-fang the European Court and emasculate the EU’S judicial order.

We may not know for weeks whether the new order will be built on a Salvini-led Right with 37 per cent of the vote, or built on the neo-anarchist Five Star Movement that vaulted to 32 per cent and swept the South – the forgotten “Trumpian Ohio” of Italy. It could of course be both: the “nightmare scenario” a Lega-five Star unholy alliance most feared by markets.

Whatever happens, it is clear that the new “Rosatellum” electoral law intended to stop these radical movements taking power has backfired disastrously, reducing the pro-eu centre to a smoking wreck with just a third of the vote.

The ruling Democrats of Matteo Renzi collapsed to 19 per cent, yet another centre-left party sacrificed on the altar of the European project. It is infinitely harder now for the country’s president to stitch-up yet another “safe” coalition under technocrat control. The Five Star movement is an

enigma. Beppe Grillo, its founding father, has stepped back, leaving day-to-day leadership to the manicured and telegenic Luigi Di Maio, the 31-year-old “Macron” of the Italian political scene.

Mr Di Maio has shuffled off his past as a university dropout and technoutopian, presenting himself as a safe pair of hands. He has steered the party away from its hardline stance on Europe and from its war on banks and creditors. “We understand the responsibility of forming our country’s government, and we say this above all to investors,” he said.

His choice for finance minister is Andrea Roventini, a Keynesian follower of Joe Stiglitz, the US Nobel laureate. He was quick to pledge that Five Star will “go to the European table only with credible proposals”. Yet these voices of moderation sit on a political volcano. A movement that began as a guerrilla campaign with millenarian visions cannot be disciplined so easily.

Markets reacted with remarkable calm to what was described by

Corriere della Sera as a “political earthquake”. Yields on Italian 10-year bonds ticked up seven basis points to 2.11 per cent, but there was no real concern. The FTSE-MIB index of equities in Milan slipped just 0.4 per cent, notable only for a seven per cent fall in the share price of Silvio Berlusconi’s Mediaset empire.

The Lega has dropped its call for a euro referendum, deeming it technically treacherous. “It is not a step that one country can take alone,” said Mr Salvini.

The intention is to subvert the system from within instead by refusing to play the euro game by German rules, and this might prove even more dangerous for Berlin and Brussels. The party plans to issue short-term treasury notes as a de facto “parallel currency” to generate liquidity within the Italian economy, accompanied by a flat tax of 15 per cent that would make a mockery of EU spending caps.

Both of Mr Salvini’s key economic advisers – Claudio Borghi and Alberto Bagnai – are convinced that Italy has been trapped in a “bad equilibrium” that has led mechanically to two “Lost Decades” and hollowed out the country’s industrial core. They argue that this cannot be rectified within the constraints of a German-run monetary union. For them it is a core conviction.

The question is whether Mr Salvini really shares this view, and how far he is willing to push the fight. Two years ago he told this reporter that the euro was a “crime against humanity”. Europe’s leaders will find out soon what he meant.

‘The intention is to subvert the system from within by refusing to play the euro game by German rules’