The EU buys time

But the resulting so-called chaos is very far from a negative result; it is certainly not the "worst possible outcome". Remember, Italy is well-accustomed to operating without a sitting government.

Recall that when we previewing the possible outcomes of Italy's government stalemate, in which president Mattarella had threatened to veto the choice of Paolo Savona as economy minister due to his anti-Euro/establishment sentiment, we said that the most likely - and market friendly - outcome, was for President Mattarella to give in to public pressure and the threat of a new election, averting a potential constitutional crisis. We also said that the second most likely outcome, and potentially far worse for markets, was that "if Mattarella and the coalition partners hold firm, we may be set for new elections, with M5S likely to repeat April’s success and Lega likely to increase its share of the votes, eating up Berlusconi’s party."

Moments ago that's precisely what happened, when Italy's premier designate, Giuseppe Conte, 53, told reporters after meeting the head of state Sunday evening that he had handed back his mandate for forming “the government of change" to president Mattarella. "I can assure you that I did my utmost to try to fulfill this task" he added.

As we reported earlier, Mattarella, who is supposed to be impartial but appears to have been anything but in this case, and was tasked with naming the premier and ministers, earlier rejected the candidacy of economist Paolo Savona, 81, who has repeatedly urged the Italian government to plan for a euro-exit, and who has criticized what he says is German dominance over Europe.

In other words, Mattarella sided with Europe over Italy's own choice.

“We worked for weeks, day and night, to ensure the birth of a government which defends the interests of Italian citizens. But someone (under pressure from whom?) said no to us,” Salvini wrote in a Facebook post, indirectly attacking the president's veto of Savona.

“At this point, with the honesty, coherence and courage of always, you must now have a say,” Salvini added in a call for early elections.

Salvini's scathing attack on the president continued: "If a government has to start conditioned by threats from Europe, that government won’t be backed by the League." The League leader then said he’d seek a full mandate in the event of new elections.

This betrayal of Italy by Mattarella is neither unforeseen nor unexpected. Everyone knew he was EU-owned. Salvini and La Lega were fully prepared to go back to the polls, knowing that this possibility would only strengthen the euroskeptics' position, which is why they refused to back down over the Finance Ministry. I tend to doubt 5 Stelle are shedding any tears over the chance to increase their numbers in the Parliament either.