As Giuseppe Conte is asked to form Italy’s next government, I walk out of a screening of Loro, the controversial portrayal of Silvio Berlusconi by Oscar-winning director Paolo Sorrentino. With images of drug-fuelled sex parties still in my mind, the uproar that accompanies the announcement about Conte appears odd. Italy has endured more than 30 years of dreadful governments. For much of the last two decades the country was led by a convicted tax fraudster. Before that, it was led by Bettino Craxi, a politician so corrupt that he ended his days as a fugitive in Tunisia. Why worry now?

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Part of the answer lies in the outsider nature of the new governing parties. Italian elites have traditionally been very adept at assimilating political newcomers. Who, in turn, have been willingly co-opted by the system. But the new coalition of the Five Star Movement and far-right League appears peculiarly unconnected to Italy’s high establishment: the risk of loss of influence is real enough.

Previous governments were quick to guarantee policy continuity, maintaining a neoliberal economic stance, overall respect for EU obligations, and a US-aligned foreign policy. The coalition promises to break away from this consensus, ushering in an era of fiscal expansion, resentment at Italy’s eurozone membership and closer ties to Russia.

The key question now is: will the new government abandon its fiery stance or stick to it? Both alternatives are unfortunately dreadful.

The capitulation scenario is a familiar one. Just like Alexis Tsipras, who turned into a reliable implementer of austerity measures in Greece, so Conte’s government might decide to set aside its promises.

Matteo Salvini has responded to international concern by telling the French economy minister to 'mind his own business'

The gulf is wide: the coalition programme contains at least €60bn of additional yearly expenses, or 3.5% of Italy’s GDP, while the EU is demanding a 0.6% deficit reduction for 2018. A bargain might look strikingly similar to what Matteo Renzi has achieved in recent years: a moderate loosening of deficit targets allowing for an insignificant fiscal expansion. In other words: business as usual.

Such surrender would only fuel more extreme forms of rebellion. After an election won with promises of meaningful change, it would tragically demonstrate democracy’s inability to offer any of it. Economically, it would preserve an unjust status quo, leading to enduring misery for the many. On this much, the new government is right: the current European economic system is unsustainable.

Facebook Twitter Pinterest ‘For much of the last two decades the country was led by Silvio Berlusconi, a convicted tax fraudster. So why worry now?’ Photograph: Andreas Solaro/AFP/Getty Images

But the alternative, confrontation, appears equally hopeless. Merely piling up public expenditure will not fix Italy’s problems: the EU needs root-and-branch transformation, not just more deficit spending. And the new Italian government has little in terms of strategy and vision for European reform.

What is more, a heated clash with the EU is likely to plunge the coalition into crisis, as the more moderate Five Star would demand compromise while the League – whose ultimate goal is to create the conditions for Italy’s exit from the euro – would fuel the fire and blame Five Star’s weakness.

Conte, the new prime minister, appears to fall exactly in between. He has links with conservative Catholic circles and a background in established law firms: he is a mediocre, junior member of the establishment. But he is a weak political figure who submitted an overstated CV and was picked because he is unlikely to challenge his new bosses: Five Star’s Luigi Di Maio and the League’s Matteo Salvini.

The most realistic scenario for Italy is muddling through: accommodation mixed with scapegoating. Salvini has responded to international concern by telling the French economy minister to “mind his own business” and promising to put “Italians first”. According to this siege mentality, the government is a hero attempting to craft a virtuous course for Italians against foreign attempts to impose austerity. For whatever it cannot deliver, blame the Europeans.

The other side of the coin is migrant bashing. The coalition programme includes proposals to make kindergartens free of charge for Italians only – forcing migrant families to pay for their (Italian-born) children. Italy may find itself much closer to Hungary than most Italians ever expected.

This course of action is unlikely to solve any of the problems Italians face, while fuelling anti-European and anti-migrant sentiments. Ultimately, Italy is only the clearest example of the catch-22 haunting most European democracies. The EU needs profound, immediate reform. But a reckless political establishment is intent on keeping everything as it is – come what may. Manfred Weber, the German leader of the European People’s party, commented on the new Italian government by declaring eurozone reform dead in the water. This is scapegoating in reverse: Germany has no desire for European reform, and is now seizing an opportunity to block all change.

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This reciprocal blame-game is reckless. The times require leadership and vision, while our politicians sleepwalk towards the abyss. As I finish reading the news, people are still coming out of the cinema. I wonder how many have watched Loro with nostalgia for times and leaders past.

• Lorenzo Marsili is a writer and philosopher