ROME — Italy's pro-EU government has a Europe problem.

The coalition — made up of the populist 5Star Movement, the center-left Democratic Party (PD), former Prime Minister Matteo Renzi's Italia Viva, and the far-left Free and Equal — is just three months old but might not last the winter, with tensions reaching a peak this week over reform of the European Stability Mechanism (ESM), the EU's bailout fund for eurozone countries.

The ESM is being revised in order to assign new tasks to the fund, including the introduction of a financial backstop to cope with bank failures. Final agreement on the revisions was expected to happen this month but Italy is set to derail those plans.

Things aren't going to get any easier for the government partners as there are key regional elections next month (in which the PD and the 5Stars are running against each other), there's a complicated budget law to pass by December 31, and the country remains on the EU's watchlist for a potential breach of the bloc's fiscal rules.

The planned overhaul of the ESM didn't seem like a make-or-break matter for the coalition until Matteo Salvini, leader of the far-right League, put it at the top of the agenda by accusing Prime Minister Giuseppe Conte of supporting a reform that would go against Italy's interests — and the 5Stars sided with Salvini in the fight.

"The ESM is the new propaganda topic for populists who want to drag Italy outside the eurozone ..." — MP Davide Faraone of Italia Viva

The 5Stars and League were uneasy coalition partners for 14 months until Salvini pulled the plug in August. The 5Stars oppose the planned ESM reform because they say it would make it harder for highly indebted countries, like Italy, to access bailout funds without painful public-debt restructuring. (However, a poll by Demopolis for La7 television published on Tuesday night showed 60 percent of Italians do not understand what the ESM reform is all about).

Finance Minister Roberto Gualtieri, from the PD, rejects such claims, but the 5Stars have asked him to reopen negotiations when he heads to Brussels for a meeting of eurozone finance ministers on Wednesday.

Conte, who was a compromise candidate for PM and is not a member of any party, hit back, saying the previous government was aware of the ESM negotiations since the end of 2018 but neither the 5Stars nor the League voiced any objections.

During an impassioned address to the Italian parliament on Monday, Conte said "there are claims the ESM [reform] will impoverish Italians, that it will benefit German and French banks, that I have signed the treaty in secret, but it is all false and it shows serious ruthlessness in polluting the political debate and undermining the country's institutions."

5Star leader Luigi Di Maio, who is also the foreign minister, looked emotionless as he sat next to the prime minister during the speech. That he didn't clap or even acknowledge Conte, and left before the end of the session, was interpreted by Italian media as another sign of the ongoing tensions between the two.

Populist propaganda?

The ESM issue has caused splits across the government.

"The ESM is the new propaganda topic for populists who want to drag Italy outside the eurozone ... It's quite frankly pathetic to see the 5Stars desperately running after the League on the topic," said MP Davide Faraone from Italia Viva.

PD leader Nicola Zingaretti took to Twitter to say that "Conte debunked the lies of the right-wing on the ESM and while others speak we act to resolve the country's issues."

But MEP Piernicola Pedicini said in a statement that the 5Stars have always been against the EU bailout fund and all "instruments [set up in a] hypocritical show of solidarity but that in reality impose structural reforms that weigh on citizens' pockets."

There's also little agreement on the reasons for Di Maio's sudden realignment with the League. Some pundits reckon he wants to take the party back to its anti-establishment and Euroskeptic roots because the pro-EU alliance with the PD — a long-term 5Star enemy — is further eroding the party's already waning popularity.

Others believe he's trying to save his political career by aligning himself with the League as he tries to fend off multiple calls from within his own party to step down.

5Star MPs are split between the hardliners, such as MP Gianluigi Paragone, who continue to oppose the alliance with the PD, and a left-wing faction that wants a stable political alliance with the Democrats, including at a regional level (something Di Maio strongly opposes).

The only time the PD and the 5Stars have ever run on a joint ticket at regional level the result was a disaster: at the end of October the center-left lost the region of Umbria to Salvini's candidate despite 55 years of uninterrupted rule by the left.

They aren't repeating the experiment in ballots in the regions of Emilia-Romagna and Calabria on January 26. While several PD officials, including Culture Minister Dario Franceschini, were hoping the two governing parties could replicate their alliance throughout the country, others, including Zingaretti, have suggested that it's a bad idea.

The government might not last as long as late January.

The rich northeastern region, which contains the city of Bologna, is Italy's most symbolic center-left stronghold. Losing it to Salvini would almost certainly destroy the coalition government and trigger a general election ...

One MP close to Zingaretti, who spoke on condition of anonymity, said they are tempted to pull the plug on the government as soon as the budget law is passed to distance the PD from the 5Stars before the Emilia-Romagna election.

The rich northeastern region, which contains the city of Bologna, is Italy's most symbolic center-left stronghold. Losing it to Salvini would almost certainly destroy the coalition government and trigger a general election, and it could leave the PD in tatters.

The latest polls suggest the PD candidate, Stefano Bonaccini (who is supported by other left-wing parties and civic movements), is in the lead, but the League could end up being the biggest individual party. Several PD officials are convinced the gap between their candidate and the League's will reduce significantly if the government isn't able to agree on crucial policy items and show voters they are capable of getting things done.

"It's increasingly difficult to continue to govern like this, with the 5Stars calling into question everything every day," tweeted longstanding PD lawmaker Pierluigi Castagnetti.

"Let's bring the curtain down?" he asked.