ITALY has gone without a government for more than two months. That is no great shock. At elections on March 4th, Italians deserted mainstream parties and backed radical populist ones whose leaders have never had to haggle to form a coalition. The surprise has been the belated reaction of the financial markets, which this week suddenly woke up to the looming threat. The men who, as The Economist went to press, were on the verge of taking power in Italy cannot be trusted to run it.

One reason for the delay—and for general concern—is that the populist parties that won the most votes have conflicting policies. The far-right Northern League promised a flat tax rate of 15%, which would lower revenues. The Five Star Movement (M5S), which claims to transcend left-right divisions, promised a universal basic income of €780 ($920) per month, which would require huge outlays. Bridging the gap between these two parties, in office as well as in the coalition talks, would be hard for the most charming and seasoned politicians, let alone the League’s firebrand of a leader, Matteo Salvini (pictured, left), and M5S’s 31-year-old head, Luigi Di Maio (right).

Another reason to beware is the parties’ programmes. Their visceral Euroscepticism threatens the integrity of the euro zone. M5S has only recently stepped back from pledging to hold a referendum on leaving the single currency. The League goes well beyond reasonable concern over refugees, advocating xenophobic and unworkable deportation policies. Both parties want to scrap sanctions on Russia, threatening the European unity that deters President Vladimir Putin’s aggression in Ukraine and elsewhere. At home they would undo vital reforms, cutting the pension age in a rapidly greying country with low fertility. They have other perverse distractions, such as M5S’s sympathy with the anti-vaccination movement.

Dangerous in isolation, their policies could be worse in combination. If Mr Salvini and Mr Di Maio reach an accord that includes both of their budgetary priorities, it would be fiscally irresponsible. Implementing the flat tax, the universal basic income and the pension roll-back would cost tens of billions of euros a year, probably increasing the deficit from 2.3% of GDP to more than 3% and breaching European rules.

Perhaps that is why an early version of the parties’ accord included demands that the ECB forgive €250bn in Italian debt and that the EU send over truckloads of money to finance M5S’s basic income. It also hinted at scrapping the euro and bringing back the lira. The document’s latest version drops the wildest proposals, but retains plenty of disquieting ones.

The last reason to worry is Italy’s fragility. With a national debt of over 130% of GDP, the euro zone’s third-largest economy is too big to bail out—even if the single currency is at stake. Although Mr Salvini and Mr Di Maio have moderated their promises, the markets have suddenly taken fright. On May 16th spreads between Italian and German government bonds widened by 0.22 percentage points, to 1.5 points—their biggest single-day increase since the Brexit vote.

Italians have reason to be angry with their politicians. Silvio Berlusconi, beset by legal troubles, neglected the euro crisis until he was forced from power. Matteo Renzi squandered the hopes invested in him by betting on an ill-fated referendum to change the constitution, leaving other reforms largely undone. The country is unstable at the top. It has had five prime ministers in ten years, and none of the past four was the leader of his party at the time it was elected. Europe, too, has much to answer for. The EU promised to help Italy cope with the refugees that arrive on its coast, but broke its word.

Circuses, but not enough bread

The pity is that neither the League nor M5S offers solutions to Italy’s real problems. Italian productivity has scarcely risen since 2001. (In Germany it is up by 16%; in Romania, by 134%.) To put this right will require loosening labour laws, reforming the courts, investing in education and infrastructure, and attacking corruption. Although the League and M5S pay some attention to these issues, their chief plan seems to be a huge burst of stimulus from tax cuts and handouts, financed by wishful thinking. Italy has stagnated for too long; it cannot afford more years of inaction, or a government that makes matters worse with incoherent radicalism. If Italians do not sort this out, the markets will render a harsh verdict.