On Friday, Giuseppe Conte was sworn in as Italy’s new prime minister, marking his first significant political foray as the leader of the country ’s first populist government. His inauguration ended a three-month political deadlock and avoided a snap election intended to be held in July.

Less-known academician Conte will govern with ministers primarily from two anti-establishment political parties the Five Star Movement (M5S) and the League (Lega). The 53-year-old Conte took the oath along with his cabinet, which placed the M5S chief Luigi Di Maio and the Lega leader Matteo Salvini in key ministerial posts.

Conte, who has no experience in government, was re-appointed after resigning last Sunday. Conte had resigned due to President Sergio Mattarella’s veto of Conte’s pick for economy minister, the Euro-critic Paolo Savona. The chief economy minister will be filled by Giovanni Tria and Savona will be the minister for E.U. Affairs in Conte’s cabinet.

Mattarella finally approved Conte’s revised lineup. The list will get a vote of confidence either Monday or Tuesday from both houses of parliament. Many Italians believe the cabinet will be approved by anti-Euro and populist coalition parties, who together form a majority in the parliament.

Problems Ahead For the European Union?

Brussels first raised concern over the victory of the M5S, due to the party’s hostility to the E.U. and its anti-immigration policies. M5S later formed a coalition with another populist party, Lega, after winning less than 40 percent of the vote in the last March’s election.

Italy’s political turmoil and difficulty forming a new government over the past few days seemed to have raised more alarm than expected. The political deadlock in Europe’s third-largest economy severely affected the world’s market. On Tuesday, The Dow fell 1.6 percent and S&P 500 dropped 1.2 percent. The Italian benchmark stock market FTSE MIB closed down at 2.7 percent and other markets in Europe slipped over one percent.

Much of the fear is that Italy will possibly leave the Euro, which could trigger disastrous effects in the E.U. International Monetary Fund (IMF) former economist Olivier Blanchard expressed his worry about Italy’s current situation.

“I’m very worried about Italy. Not worried about the rest of Europe. It will be tough, but the rest of Europe, the rest of (the) euro will be OK,” he said in an interview with CNBC.

What’s next?

The country’s new populist government under the M5S and the Lega will face challenges to keeping their campaign promises, as they may violate E.U. regulations.

If Italy tries to implement the coalition’s new immigration reforms which include an 18-month deadline for the asylum process, aggressive detention of illegal immigrants’ and deportation of half a million immigrants to their country of origin, Italy could be in contradiction of E.U. policy.

If Italy implements its new populist economic policies, which aim to slash taxes and increase spending is estimated to cost around 170 billion Euros or 10 percent of the country’s Gross Domestic Product (GDP). Forecasters claim it would raise the budget deficit to 5.8 percent, above the E.U.’s agreed ceiling of three percent.

“If … it is just a question of spending and spending and borrowing and spending then, unfortunately, it will be a replay of Greece,” said Maltese Finance Minister Edward Scicluna in Brussels.

Pivotal Italian Election On Sunday, Immigration Central Role in Italian Politics