THE powers of an Italian president are few, but mighty. He—there has never been a she—can declare war, dissolve parliament and name the prime minister. The constitution also stipulates that the president names the ministers, “on the proposal” of the prime minister-designate—a provision that has been interpreted to mean that a prospective head of government must table a list of choices that the president can accept or, sometimes, reject.

On May 27th President Sergio Mattarella deployed the last of those powers to devastating effect, halting the formation of a populist coalition between the anti-establishment Five Star Movement (M5S) and the hard-right Northern League. He refused to swear in a Eurosceptic, Paolo Savona, as finance minister. After the prospective coalition partners refused to withdraw Mr Savona’s name, Giuseppe Conte, the lawyer who was to have headed their government, backed out.

His withdrawal raised the likelihood of an early election that could become a proxy referendum on euro membership. The prospect sent a wave of panic through capital markets far beyond Italy (see article) as investors fretted that the euro zone’s third-biggest economy might leave the single currency.

But as Italy approached its 90th day without a properly functioning government, it was far from clear whether Mr Mattarella’s rebuff had advanced or obstructed the march of Eurosceptic populism. The answer may not be clear for weeks, even months. On the one hand, the president has equipped Italy’s populists with a dream narrative: mainstream elitist thwarts the representatives of the popular will (together, the M5S and the League won half the votes in the general election on March 4th and together hold a majority in parliament). Incomprehensibly, Mr Mattarella added credence to that tale by handing the task of forming a stop-gap government to Carlo Cottarelli, a former official in the IMF, an organisation reviled by anti-establishmentarians the world over.

But on the other hand, Italy’s continuing political melodrama has demonstrated that Europe’s populist insurgents are under immense constraints. James Carville, who helped Bill Clinton to power, famously quipped that he wanted to be reincarnated as the bond market, because “You can intimidate everybody.” That is especially true of Italy, whose public debt stands at around 130% of GDP. If investors in its government bonds start to worry about the risk of default, as they did this week, they demand a greater return in the form of higher yields, making it costlier for the government to borrow, and in turn increasing the risk of default.

The EU’s budget commissioner, Günther Oettinger, sparked outrage in Italy when he said that he hoped the market turmoil would persuade Italians “not to hand populists on the right and left any responsibility in government”. Politicians of all stripes accused him of interfering in the affairs of a member state. But he had a point, and it was not lost on the young leader of the M5S, Luigi Di Maio. Hours later Mr Di Maio made an abrupt U-turn, dropping an earlier call for Mr Mattarella to be impeached and signalling his readiness to renew talks on a coalition. Amid rumours of a compromise that would give the finance portfolio to a euro-friendly economist, a degree of calm returned to the markets. But that ignored the attitude of Matteo Salvini, the pugnacious head of the League, who initially said that all he wanted was a date for fresh elections, but not until after the summer. This revived suspicions that his aim from the outset had less to do with putting a Eurosceptic in the Treasury than with picking a fight with the president that would force a new election.

One thing that is clear is that the anti-immigrant League is on a roll, as much for its views on kicking out migrants as on the economy. Its support has grown from 17.4% at the general election to as high as 27% in some opinion polls. Just as important, backing for the League’s rival for the leadership of the right, Silvio Berlusconi’s Forza Italia party, has slumped from 14% to as low as 8% in some polls. One recent survey found Mr Salvini is now Italy’s most popular political leader. As The Economist went to press, it was still unclear whether Mr Salvini would now continue to push for an early election, or whether a new agreement between the two populist parties, without Mr Savona as finance minister, was back on the cards.

Both parties are to hold rallies on June 2nd, a national holiday in Italy. Police have been asked to increase protection for official buildings. But, for now, the threat of violence is remote. The Five Star Movement is doctrinally pacifist. The League’s bark has always been worse than its bite. But there are plenty of other reasons to feel glum about Italy. Apart from an all-populist government, there are no obvious options. There has been a degree of speculation that the M5S might again to seek a deal with the left-of-centre Democratic Party (PD). But the PD, which had a disastrous election, is bitterly split and has so far refused even to talk to the M5S. Others have wondered about a right-wing coalition of the League, Forza Italia and two smaller groups. But this would be a minority government, forced to cobble together ad hoc majorities for every bill.

As for Mr Cottarelli, were he indeed needed to head up a caretaker government, he may not have much difficulty assembling a team of apolitical experts. But it would have scant legitimacy: not a single major party has said it would back it in the votes of confidence it would need to win in both houses of parliament. Without them, Mr Cottarelli’s enterprise would be reduced to keeping the country ticking over until election day. And when that came, perhaps as soon as the autumn, there would be every possibility that the electorate would again deliver a result that hands the majority of votes and seats to two populist parties that remain deeply wary of each other, that disagree on how to get Italy working for ordinary people, yet who still may well end up working together in a star-crossed coalition. Neither outcome looks encouraging.