Italy isn’t the next Greece. Here’s why

Everyone thinks they know the script of how Italy’s saga will play out. As the populists take power in Rome, they will rail against Brussels, try to fight austerity, come up with some bold plans for reforming the euro, and hold a referendum or two. And then they will meekly cave in as Angela Merkel and the European Central Bank, the euro-zone’s equivalent of Gordon Brown’s ‘big clunking fist’ from a decade ago, bring them to heel. After all, that’s what happened in Greece when Syriza took power. A lot of fighting talk was followed by a dismal surrender, and five years of budget cuts, tax rises, and unending recession.

But there is a chance that Italy will be different. Why? Because it is a far bigger economy? Because it has a trade surplus? Because its debts are so enormous – a trillion euros owed to the rest of euro-zone – that it holds a stronger hand? Those are all important factors, and may well help. But the real reason it might be different is this: between them the Five Star Movement and the League have a plan. And it is not a bad one either.

When Syriza took power, its leather-jacketed finance minister Yanis Varoufakis toyed with the various proposals for an overnight withdrawal from the euro. It was, however, back-of-a-fag-packet stuff: think Boris Johnson on a bad day. No real, detailed planning had been put in place. When the ECB effectively switched off the cash machines, in a brutal display of central banking authority, the game was up. Three years later, Italy’s populists appear to have learnt from that defeat. Taking power yesterday, Italy’s new Prime Minister Giuseppe Conte showed few signs of compromising on the coalition’s radical challenge to the EU’s establishment.