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The leaders of Italy's two main populist parties appeared to be throwing down a gauntlet at Europe last week, forming an anti-establishment government that they imagined would act on their staunchly anti-Brussels agenda.

But on Sunday, Italian President Sergio Mattarella picked that gauntlet up and delivered his own challenge.

Mattarella, who holds rarely used veto power over cabinet ministers, blocked the appointment of 81-year-old Paolo Savona as finance minister, citing Savona's long-held opposition to the euro. Neither of the two parties forming Italy's coalition government — the anti-establishment Five Star Movement and the ultranationalist League — had campaigned on exiting the single currency, and Mattarella suggested he was acting in the country's interests by vetoing Savona.

“The adhesion to the euro is a choice of fundamental importance for the perspectives of our country and our youth,” he said. “If you want to talk about it, we need to do it openly and with a serious, in-depth analysis.”

But the populists offered no alternative replacement, and their would-be government has quickly collapsed. Giuseppe Conte, the inexperienced academic tapped to become prime minister, gave up his mandate on Sunday. Mattarella then asked Carlo Cottarelli, a former official at the International Monetary Fund, to lead a technocratic caretaker government while a new election is arranged.

That election, expected in the autumn or early next year, is shaping up to be a battle over Italy's future in Europe. The populists immediately directed their ire at Mattarella and the European elites supposedly undermining Italy's popular will.

Luigi Di Maio, leader of the Five Star Movement, the party that won the most votes in the March election, deemed the president's actions “unacceptable” and called for his impeachment (a process that, like so much else in Italian politics, would be long and complicated).

“They've replaced a government with a majority with one that won't obtain one,” Di Maio told supporters at a rally near Rome.

“The upcoming elections will not be political, but instead a real and true referendum ... between who wants Italy to be a free country and who wants it to be servile and enslaved,” said League leader Matteo Salvini on Monday, raging against the European establishment. “Today Italy is not free; it is occupied financially by Germans, French and eurocrats.”

The populists' critics accused them of fiddling while Italy teeters toward a new economic crisis, the value of its bonds slumping over fears of what could come next.

“They were supposed to govern, but they’re fleeing their responsibility: either they aren’t capable, or they’re afraid,” wrote former Italian prime minister Matteo Renzi in a Facebook post about the populists. “In recent weeks they’ve burnt billions of savings of the Italians, with scatterbrained statements on the euro, on our debt, on the future. And today, instead of jump-starting the government as they could easily have done, they attack the President of the Republic, calling for his impeachment.”

But the public mood is not on the side of Renzi and other centrists. Di Maio's and Salvini's electoral victories were a shock, but they were the product of widespread apathy and disaffection among Italian voters. Political paralysis and economic crises have led to a succession of technocratic governments running the country and kicking the can down the road.

A poll on Monday found that a majority of Italians disagreed with Mattarella's decision. It also found support surging for the League, a party that seeks mass deportations of undocumented immigrants, that seeks to deny immigrant children free access to kindergarten and that had pushed for Savona's appointment to the cabinet.

Cottarelli, meanwhile, gives the populists the perfect foil, an embodiment of the elitist, anti-democratic, high-handed enemy they rail against. Yanis Varoufakis, a leftist Greek economist and former finance minister who had his own battles with Brussels, criticized Mattarella's decision to thwart the populists on their selection of a finance minister — rather than Salvini's explicit program to carry out mass deportations.

“Beyond his moral failure to oppose the League’s industrial-scale misanthropy, the president has made a major tactical blunder: he fell right into Salvini’s trap,” Varoufakis wrote in the Guardian. “The formation of another 'technical' government, under a former IMF apparatchik, is a fantastic gift to Salvini’s party.”

“Cottarelli isn’t just offensive to the League and Five Star on the grounds of economic policy — he also directly opposes the right of the people to determine their own future,” said Henry Newman of Open Europe. “Speaking after Brexit, Cottarelli called for European leaders to block further referendums within the EU.”

This is not a scenario unique to Italy. Frustration with the mandates of Brussels and the domineering role played by Germany abounds in many corners of Europe. There is little debate over the need for European reform, including finding ways to ease the burdens of public debt, the anvil hanging from Italy's neck.

“Italy is only the clearest example of the catch-22 haunting most European democracies,” wrote Italian philosopher Lorenzo Marsili. “The EU needs profound, immediate reform. A reckless political establishment is intent on keeping everything as it is – come what may.”

But it's unclear whether officials in Berlin or Brussels will want to give an inch to the populists clamoring for their downfall. “The whole German worry is about risk sharing and giving other countries guarantees and not being able to have any sort of rules-based mechanism working well,” said Daniela Schwarzer, the director of the German Council on Foreign Relations, to the Atlantic. “The arrival of a populist government in Italy — or the scenario now is uncertainty in Italy — basically feeds into the fear that Italy doesn’t play by the rules and that will make any move toward deeper integration more difficult.”

The mutual antipathy stokes populist rage. It now seems plausible that the League could siphon support further from both the center-right and even the Five Star Movement, emerging as the most influential player in Italian politics. The center-left, like its counterparts elsewhere in Europe, has turned into a political bystander, while the country may lurch toward the sort of illiberal nationalism seen further east.

As Marsili observed, “Italy may find itself much closer to Hungary than most Italians ever expected.”

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