Trader: Italy On Verge Of Inducing Fresh European Crisis

It turns out that the euro break-up trade isn't dead -- it's just been hibernating and is likely to return with a vengeance in the months ahead if the populists get their way.

Their proposed economic policies make no attempt at debt sustainability. Italy already has the largest absolute debt pile in the EU and the second-largest, after Greece, as a percentage of GDP, at 132%.

The coalition's plan sends the signal that it has no intention of ever paying back its debt. Things could spiral quickly because its fiscal promises will send BTP yields much higher, adding to refinancing costs and making the budgetary situation worse.

That creates a dilemma for the EU. Either fund Italy's largesse at the expense of every other member country, or kick Italy out of the euro.