Large banks and hedge funds are advising clients to brace for trouble ahead of the Italian elections in early March, warning that a late surge by anti-EU populist parties threatens to shatter Europe's brief -political calm.
A new batch of polls over the weekend showed a further hollowing out of the Italian political centre, with rising risks of gridlock or even the "nightmare scenario" of a radical coalition in open breach of EU treaty law.
Markets have become inured to political risk after a series of false alarms: the election of Donald Trump, and populist jitters in Holland and France.
Worries over a global financial shock from the Brexit referendum were shown to be absurd.
But this may have led to complacency over Italy, which faces the double danger of electoral chaos just as investors start to fret about the tapering of bond purchases by the European Central Bank, currently the only major buyer of Italian treasury debt.
"Italian corporates do not offer enough political risk premium ahead of the March 4 election," said Matthew Bailey, a credit strategist at JP Morgan. "We would recommend cutting exposure to the region."
Regulatory filings by the world's biggest hedge fund, Bridgewater, show that it had taken out a giant US$22 billion ($29.9b) short position on European equities as of early February, with big bets against Italy's Intesa Sanpaolo and Unicredit, and the energy groups ENI and ENEL.
Bridgewater is also targeting firms in France, Spain, Holland and Germany, but what is striking is that it tripled its short bets against Italy to US$3.2b between October and February.
This coincides with the steady rise of rebel parties and the seeming death spiral of Italy's ruling centre-Left, the main home for pro-Europeans.
A new Demetra poll showed the Five Star movement founded by neo-anarchist comedian Beppe Grillo pulling ahead as the biggest single party with 29.4 per cent of the vote.
The Italian election has the potential to move the market.
The other upset is that the firebrand Lega Nord has drawn neck and neck with Silvio Berlusconi's Forza Italia and could be in the extraordinary position of picking the next prime minister under the coalition deal of the combined political Right. This would propel Lega leader Matteo Salvini, who calls the euro a "crime against humanity", to the centre of European politics.
"If we win by one vote, Salvini will be Prime Minister, it is as simple as that," said Claudio Borghi, the party's economics spokesman.
The Lega has not dropped its anti-euro platform. It still wishes to restore the lira but prefers to move step by step with salami tactics, a sort of reverse "Monnet method".
It plans to issue tradable "perpetual Treasury notes" to pay off contractors and government arrears, creating a de facto parallel currency within the euro that subverts monetary union from the inside.
It vows to amend the Italian constitution to establish the primacy of Italian law over EU law, introducing a so-called "Karlsruhe clause" that mimics the posture of the German constitutional court.
"We will have a very open chat with the guys in Brussels and tell them we couldn't care less about the bloody deficit," Borghi said.
"We have to do a stimulus programme to achieve sustainable growth, and we believe the debt-to-GDP ratio will come down because of the denominator effect. We're very relaxed about what the EU can do to us. The difference between Greece and Italy is that we pay the EU money. We are a net contributor."
Such a government would clearly be at daggers drawn with Brussels over everything from fiscal policy to the migrant crisis.
Even if Forza Italia has the upper hand in a Right-wing coalition - still the most probable outcome - any such government is likely to pursue a range of policies that breach the rules of monetary union. Citigroup said plans for a flat tax would raise the budget deficit by 1.2 per cent of GDP.
Lorenzo Codogno, former chief economist for the Italian treasury and now at LC Macro Advisors, said the package of tax cuts, higher pensions and welfare spending would together cost 10 per cent of GDP.
"They keep promising the moon. No serious economist would take these platforms at face value," he said.
Citigroup said there is a 15 per cent chance of an unholy alliance of the Lega and the Five Star movement - united chiefly by their loathing for diktats from Berlin and Brussels - estimating that this would push up risk spreads on Italian 10-year bonds by 125 basis points.
It puts a 25 per cent chance of a Left-wing coalition led by Five Star, hardly less of a thunderclap.
"The Italian election has the potential to move the market," it said.
Five Star has shed some wilder policies under its telegenic young leader Luigi Di Maio, but the Five Star manifesto fundamentally violates agreed EU policies and treaty law.
The issue of "Italexit" from the euro has been overtaken by events. None of these movements plans a full-blown rupture with the euro in the way that France's Marine Le Pen was planning before the French elections last year.
The danger for the eurozone authorities is now of a different kind: Italians have become deeply cynical about the moral claims of the EU project and the lack of solidarity when it matters.
There is a pervasive feeling that monetary union was "gamed" by others - chiefly Germany - at great cost to the Italian industrial economy, and that Italy was then left alone to tackle the migrant crisis after the Balkan route was closed.
The riposte of Italy's rebel parties is to fight back by taking matters into their own hands. The EU's permanent political crisis has not disappeared. It has mutated.