Italy risked careening into a new financial crisis amid a warning from the Bank of Italy that the country’s leaders could not “disregard” fiscal constraints and its treaties.

The remarks by Ignazio Visco, chairman of the Bank of Italy, who said the country was at risk of losing the “asset of trust”, came as markets were hit once more, with investors and senior politicians in Brussels growing more alarmed that the mood against the euro in Italy is strengthening. The yield on two-year bonds rose to 2.442%, the highest level in four years. The political crisis was set off late last week when the leaders of the country’s biggest populist parties – Luigi Di Maio of the the anti-establishment Five Star Movement (M5S) and Matteo Salvini of the far-right Lega – insisted that the Italian president, Sergio Mattarella, approve their choice of a finance minister, Paolo Savona, who is a fierce critic of the euro. Mattarella vetoed the nomination – a power that he is given in the Italian constitution – but faced an immediate backlash and the collapse of the incoming populist government before it even took power.(theguardian)…[+]