Italy has a new coalition government. One wing of it aligns with France’s Marine Le Pen, admires Hungary’s Viktor Orban and is determined to forcibly deport half a million migrants over the next year and a half. The other wing is stuffed with anti-vaccine conspiracy theorists and is so chaotic that it makes Ukip look like New Labour in the 1990s.

Both wings are sympathetic to Vladimir Putin and are pushing for European sanctions on Russia to be lifted. Their puppet prime minister is to be an obscure law professor who appears to have embellished his meagre academic credentials.

As if all this wasn’t bizarre and depressing enough, both Five Star and The League have campaigned in the past for Italy to ditch the euro.

Though quitting the single currency does not command majority support in Italy, many suspect the strategy of the two movements is to provoke a clash with the rest of the single currency area’s member states and to profit electorally from the ensuing chaos. In other words: these populists relish playing with fire.

And with a study by the European Council on Foreign Relations think tank suggesting that levels of “cohesion” in Italy with the EU have plummeted over the past decade, there is plenty of combustible material around.

Perhaps it’s the fact that the anti-establishment Five Star was founded by a comedian, Beppe Grillo, that has led to financial markets struggling to take its tie-up with the xenophobic League seriously.

Despite a selloff of Italian bonds over the past week, the country’s interest rates are still very low. At around 2.35 per cent, they are no higher than they were even a year ago. These are not levels that scream “emergency”. Those 7 per cent-plus Italian interest rates, which almost destroyed the entire single currency in 2011 and 2012, are nowhere in sight.

The assumption seems to be that Italy’s populist experiment will be contained by the country’s domestic institutions (particularly its strong presidency), the backstop bond-buying of the European Central Bank and the unflappable statecraft of Brussels, Paris and Berlin. The Eurogroup and the European Commission successfully faced down the kamikaze far-leftists of Syriza in Greece in 2015, goes the logic, so they can do the same to the Italian populists.

A lot of traders have lost money over the past five years wagering on the demise of the single currency. Perhaps it’s not surprising that few seem to want to make that bet again now.

Yet whatever the dance playing out in financial markets, the mood music from Europe’s mainstream leaders over the populist takeover in Rome has been a symphony of complacency. The most they have roused themselves to say in public is that there will be no relaxation of the eurozone’s rules, whatever the Five Star/League programme demands.

A generous view would be that they are carefully working out their next move. But Europe’s leaders should not really be asking themselves how to handle Five Star and the League but questioning how it came to be that they will soon be sitting across the table from them in the first place.

The answer is surely that Italy’s economy is a disaster zone. We talk, with good reason, about a lost decade of growth here in Britain in the wake of the financial crisis. But compared with Italy we have been in an emerging market-style boom.

Per capita GDP in Italy is still more than 8 per cent lower than it was when Lehman Brothers went bust in 2008. Quite incredibly, it is even lower than it was when the country joined the eurozone back at the turn of the millennium. Unemployment stands at 11 per cent, down from a peak of 13.1 per cent in 2014, but still double the 5.8 per cent low seen in 2007.

This story of economic failure must surely be a large part of the reason why Euroscepticism has taken hold of this once supremely enthusiastic member state and why the country’s mainstream political parties have collapsed, letting in a bunch of populist cranks and xenophobic authoritarians.

Much of the new coalition’s programme is misguided. Some of it is repellent. But the call for a reconfiguration on the eurozone’s fiscal and monetary rules is justified.

Italy certainly needs market reforms. But it also needs more public investment. And the eurozone’s policymakers have undermined Italian domestic reformers by keeping the macroeconomic environment far too restrictive and ignoring the polite calls of successive waves of technocrats in Rome for more support.

The calls now will be less polite. But the great fear is that the eurozone’s leaders, like the Bourbons, have learned nothing and forgotten nothing.