Italy’s Political Drama Raises Stakes for Euro

President’s decision to block formation of a euroskeptic government revives fears of a eurozone existential crisis

ROME—Italy hurtled toward a political crisis that is reigniting debate over Europe’s future, including whether the eurozone’s third-largest economy should remain in the currency union.

The impasse, sparked by President Sergio Mattarella’s decision on Sunday to block the formation of a euroskeptic government, revived longstanding European fears that Italy, with €2.3 trillion in debt and a perennially sick economy, could trigger a new existential crisis in the eurozone.

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