The Italian government has broken down, not over the budget but over a high speed train. The derailed train is racing relentlessly towards Brussels. The last thing we all need is an Italian political crisis at a time like this. If Matteo Salvini were to win the election in a landslide we would not rule out another eurozone crisis.

The breakdown of the coalition is not official yet. We are at the stage where Salvini has told Giuseppe Conte that he wants to pull the plug and head for early elections. We presume that the prime minister will now call for a vote of confidence in the parliament, which will get the ball rolling. 

The Italian media speculate that the date for new elections is likely to be the first or second weekend in October. We are now in the situation president Sergio Mattarella wanted to avoid at all costs: an election that endangers the delivery of the 2020 budget within the EU timetable. So, why pull the plug now, we wonder? Why not in June just after the Lega won the European elections in a landslide? 

To us the answer is clear. Matteo Salvini needed an iron-clad pretext. Five Star fell into this trap when they tabled a vote to stop the TAV train between Lyon and Turin, which the Lega supports. You could be forgiven for thinking that trains are the biggest issue in Italian politics right now. They are not. They are the biggest pretext.

The prime minister gave an angry press conference last night, in which he acknowledged the nearing end of his government. He promised a tell-all electoral campaign by exposing the dishonesty behind Salvini’s decision to pull the plug on the coalition at this point. The political commentator Massimo Franco writes in Corriere della Sera that Salvini and Conte are the two opposing players in Italian politics - not Salvini and Luigi Di Maio. Would Conte be Five Star’s official spitzenkandidat for the elections?

Our main focus is on what this means for Italy’s relations with the EU. Salvini is Italy's new strongman. In the absence of intruding events, we would expect him to win the elections and become prime minister. We know that his party favours a parallel currency, the so-called minibots. He will have the ability to implement it. The recent truce agreed between Conte and the European Commission will not hold up in that case. Even without Salvini’s tax cuts, Italy is headed for a fiscal overshoot in 2020. Germany, meanwhile, is going in the opposite direction, desperate to cling on to its fiscal surplus target (see our story below). Germany and the EU will not easily let Salvini run excessive deficits. 

So the battle may not even be between Salvini and Conte, but between Salvini and Angela Merkel. The fall in global interest rates favours Salvini. With interest rates at currently levels, Italy’s debt is easily serviceable even without the help of minibots. This is not a time for investors to drive up anybody’s interest rates. If ever there has a propitious time for a large illegal fiscal boost, this is it.

We take the minibots very seriously indeed - especially once they have the official backing of the government. During the Greek crisis, the parallel currency was a mere discussion point, never a policy. At its most innocuous level, the minibots could be used by the government to clear the backlog of payment arrears. But their intrinsic technical advantage lies in their ability to serve as a fully-fledged parallel currency.

Salvini could cause the EU all manner of other trouble as well. Would he respect the consensus-driven approach in the European Council? We don’t care so much about his personal ties with Vladimir Putin or Viktor Orbán. What worries us more is his link with Donald Trump. Could there even be a subversive UK-Italy axis, supported by the US? Italy has so far not played any real strategic games of its own in the EU, as Italian politics was usually driven by short-term objectives. We vividly remember how Matteo Renzi metamorphosed from a politician critical of Merkel into one seeking photo opportunities with her. 

So what should we watch out for in the next days and weeks? We should remember that Italian polling is terrible. That goes for private polling as well. The issue that interests us is not so much whether Salvini will end up as prime minister. It is hard to see how that can be avoided. More important is whether he ends up with an absolute majority, or even a two-thirds majority. Italy has a mixed voting system, with some seats allocated by proportional representation and others on a first-past-the-post basis. If Salvini's supports exceeds a certain threshold, he could sweep the floor. For much of the stuff Salvini wants, the two-thirds parliamentary threshold would be decisive. It would allow him to change the constitution, leave the eurozone, do almost anything he wants. A simple majority would only allow him to govern within the existing framework of international treaties.

So, what does Salvini really want? Does he only want to be prime minister? Or does he have bigger, more sinister plans? That is the question we are asking ourselves.