Italy has been without a government since elections in March because no political party has been able to form a majority. Two populist parties the Five Star and the League attempted to join forces but had to abandon the effort after Italian President Sergio Matterella vetoed their choice of a euroskeptic finance minister on Sunday.

On Wednesday, it was reported the two parties were trying to "compromise on another name" for the post and soliciting support from the Brothers of Italy, another right-wing party.

However, the move by Matterella suggests that he is trying to prevent his country from following the United Kingdom’s lead and exiting the European Union, which would deal an even heavier blow to the European economic bloc than Brexit did, as it is the fourth-largest economy in the EU and the third-largest member of the eurozone.

It was this concern that caused the stock markets to plunge on Tuesday.

Matterella's handpicked prime minister, Carlo Cottarelli, a former director at the International Monetary Fund, is thought unlikely to secure a vote of confidence in the Italian parliament as the major parties are calling for Mattarella to dissolve it and send the country back to the polls in July.

If that is the case, it is forecast that the two populist parties would win an even greater majority in parliament, with fears the election would become a de facto referendum on whether or not the country should leave the EU.

Although it is not clear if the populists would want to run on that platform, they are determined to increase government spending at a time when the country's government debt is the third-highest in the world and pushing for revision of the fiscal rules for the eurozone and reform of the EU.

This would put more pressure on the EU which is struggling to get its house in order.

If Mattarella's move was necessary to try and protect Italy's position in the eurozone and thus defend the unity of the EU, it is more than necessary for the EU leaders to reflect as thoroughly as possible on why populism has surged so rapidly and strongly in many European countries.

They need to reflect on whether European integration has delivered what was expected of it, and if not why not.