RUTHFULLY YOURS

This March brings another nasty first: power to the populists of the left-wing 5 Star Movement and the far-right League. Radical parties have won seats in several European legislatures, but nowhere have they captured a majority. Forget Marine Le Pen’s National Front in France, which can’t win more than a third of the French public. The outcome in Italy is historic: Europe’s fate may well be decided in Rome.

Imagine, in American terms, a coalition between Bernie Sanders and the tea party: an orgy of government spending on one side, tax cuts and small government on the other. Can’t be done? In Italy, non fa niente—it doesn’t matter. We can eat our pizza and have it too. While 5 Star seeks a guaranteed income of €780 (around $900) a month, the League will pursue its suggested flat tax of 15%.

Now do the arithmetic. Italy’s public debt has already surpassed 130% of gross domestic product, and European hedge-fund manager Joseph Oughourlian predicts that the new government’s goodies could swell the annual deficit by more than €150 billion.

This economic-policy brew becomes even more toxic when we add the issues about which the League and 5 Star agree. Both want to cut the pension age, which would be poison for a nation with a shrinking labor pool and one of the lowest fertility rates in Europe. In foreign policy, both rail against the euro and Brussels “imperialism,” mumbling that Italy should receive about €250 billion in debt forgiveness. Both want to cozy up to Vladimir Putin by scrapping sanctions, which amuses neither President Trump nor German Chancellor Angela Merkel.

The markets don’t like what they see. The spread between German bunds and Italian 10-year bonds had narrowed from 3.5% in 2013 to a shade over 1% at the end of April 2018. Last week it spiked to 2.6%, erasing most of Italy’s gains.

Is bella Italia turning into brutta Italia, an ugly denizen of the European Union and North Atlantic Treaty Organization? Casting around for heartening news, Italy’s friends have actually found some.

First, the coalition may not last long. The League and 5 Star partnership, the weirdest of couples, is as stable as nitroglycerin. Neither party wanted to yield the prime ministership to the other, and it took them nearly three months to cobble together a government with a weak prime minister.

Cain and Abel could have done better. Stand-ins like Giuseppe Conte, a little-known academic, do not lead long lives in the Palazzo Chigi. So one might take refuge in cynicism. Italy has had 66 governments in only slightly more years since World War II. This government may not last long enough to impose its bizarre program on the country.

Perhaps the electorate will come to its senses as it watches the League and 5 Star continue to slug it out in government. These parties hate the euro, but 72% of Italian voters want to stay in the eurozone.

By all rights, Italy should not be in the euro. Its debt-to-GDP ratio is second only to Greece’s among eurozone nations. Its growth rate has been flat for a decade. Since the global financial crisis, Italy’s unit labor cost—a key measure of competitiveness—has increased by double digits. Ciao, Italia, right?

Look again, and behold the positive. Italy’s deficit has shrunk to 2.3% of GDP, better than France’s. The rise of the unit labor cost, which for years had plagued Italian exports, slowed to just 0.5% in 2016.

Now add to these pleasing statistics the big one: Never will the EU let Italy sink, not this founding member and Europe’s fourth-largest economy. As they say, Italy is too big to fail, and this is where Mario Draghi and the European Central Bank come in. Mr. Draghi pledged in 2012 that he would do “whatever it takes” to preserve the euro. He kept his promise, and overdid it by pouring trillions of liquidity into the eurozone.

Already, the ECB is holding down Italian bond yields, and it has an ample toolbox to buy bonds en masse while providing no-cost loans to banks. Europe will do whatever it takes to save Italy. But will Italy save itself, having lined up behind the Pied Pipers of the League and the 5 Star?

Let’s cull an answer from history to demonstrate Italy’s capacity for pragmatism. Yes, the Italians invented fascism and joined Hitler in World War II. Yet by 1943, the Allies were on a roll, and calculated interest moved in. Mussolini was toppled, flanked by a separate armistice with the U.S. Realism is a winner, this tale whispers. In 1949, the chastened ex-fascists were promoted to founding members of NATO. Not bad for a loser.

Mr. Joffe is an editorial council member at Die Zeit in Hamburg and a fellow of Stanford’s Hoover Institution.