"The next elections could become a de facto referendum on Italy remaining in the eurozone," one economist said.
ROME — The Italian president's decisions to quash a proposed populist coalition and ask economist Carlo Cottarelli to assemble a politically neutral government sets up the steps to an early election that could have Italy's voters going to the polls for the second time this year.
Italy is no stranger to chaotic politics, government crises and revolving-door executives. But recent developments were remarkable even by Italian standards.
Here's a look at how Italy got to this point, and what could come next:
A POPULIST PATCHWORK
A national election held March 4 produced a hung parliament. The anti-immigrant, right-wing League and the anti-establishment 5-Star Movement eventually set aside populist rivalries to draft a coalition platform, which included plans for a flat-tax, rolling pack pension reforms and government subsidies to the unemployed.
On Sunday night, President Sergio Mattarella ended plans to form Western Europe's first populist government by vetoing their euroskeptic pick for economy minister. The president argued that Italy could not be perceived as entertaining an exit from the euro.
When the League refused to budge on having Paolo Savona as economy minister, Mattarella stuck to his constitutional prerogative to veto Cabinet ministers, and the populists were foiled in their quest to govern Italy. Mattarella then asked Cottarelli to set up a non-political government to lead the country to another election.
A 'NEUTRAL' GOVERNMENT
Cottarelli, a former International Monetary Fund official, promised to quickly assemble a Cabinet. Once Mattarella approves the proposed ministers, the new government can be sworn in within a day, or even hours.
The premier-designate pledged that his "neutral" government would guarantee "prudent" management of Italy's public debt, the second highest in Europe after Greece.
While vowing to press the European Union to respond to concerns generating discontent at home, Cottarelli stressed that Italy's "role in the union is essential, as is our continued participation in the eurozone."
A THUMBS DOWN
After being sworn in, every new government in Italy faces a mandatory confidence vote in each chamber of Parliament. The populists, who together account for a little more than half the seats in the legislature, have already given Cottarelli the thumbs down.
Should the government lose the confidence votes, Cottarelli said a new election would be scheduled as soon as "after August." His government would then stay on in a caretaker role until the election.
Should his government pull off the confidence wins, Cottarelli said he would lead Italy through the end of the year to pass next year's budget, after which the president would send Parliament packing and the election would be held in early 2019.
A CAMPAIGN UNDERWAY
The 5-Stars and League responded to Mattarella's veto with a chorus of criticism that Italy had ceded its sovereignty to the European Union and international financial markets.
Essentially, campaigning for the next election is up and running regardless of when the voting is done, promising a heavy dose of euro-skepticism and "Italians First" slogans, especially from the League.
Nicola Nobile, lead economist at Oxford Economics, predicted the "the next elections could become a de facto referendum on Italy remaining in the eurozone."