Just when the intermission of the German elections seemed destined to continue as Chancellor Angela Merkel tries to put together a governing coalition, Italy has rung the bell to launch the next round of the euro crisis. In consequence, Italy's bonds are heading for junk status.

Faced with expulsion from the Italian Senate, former Prime Minister Silvio Berlusconi over the weekend threw his country's politics and finances into renewed chaos just as Italy's shaky coalition government is trying to negotiate a new budget.

Faced with servicing a debt of more than $2 trillion, Prime Minister Enrico Letta has now been confronted with the withdrawal of all five of his ministers from Berlusconi's party.

Berlusconi pulled the plug as Standard and Poor's rating agency warned that it would downgrade Italy's credit status "by one notch or more" unless the country could show "institutional and governance effectiveness."

Letta has already threatened to resign unless he gets a vote of confidence this week from the Italian Parliament, which he cannot win without Berlusconi's backing. This seems unlikely, at least without some legally dubious ploy that would allow Berlusconi to evade the law (once again) and keep his Senate seat despite his convictions for tax fraud and sex with a minor.

Berlusconi's agenda may be even larger than simply saving his own political skin. Three weeks ago, Lorenzo Bini-Smaghi, the Italian member of the six-person board of the European Central Bank, published a book that was half memoir, half analysis of the euro crisis.

Titled "Morire de Austerita" -- "Dying from Austerity" -- the book contained the first high-level confirmation that, at the height of the crisis two years ago, Berlusconi, then the prime minister, called Merkel and French President Nicolas Sarkozy and suggested that Italy might withdraw from the euro.

When then happened suggests that the French and German leaders, with the backing of the European Commission and Central Bank, engineered something unpleasantly close to a coup to rid themselves of Berlusconi and replace him with former EU Commissioner Mario Monti.

On Nov. 9, 2011, Monti was appointed a senator for life. The following day, as the Italian Parliament grappled with an unpopular austerity budget, ECB officials went to Rome to review the budget provisions.

The ECB officials met four men: the presidents and vice presidents of the two houses of the Italian Parliament. One of them, Sen. Massimo Garavaglia, who was also vice president of the budget commission, has since given a TV interview of what happened in that meeting.

"They interrogated us," he recalled. "In the end, the last question was, 'Will you support Monti government?'"

According to Garavaglia, he said a prime minister couldn't be appointed like that. There would have to be an election and "the people will decide."

The ECM officials than said: "No, you don't understand. If you don't support Monti we will not buy your bonds for two months and you will go bankrupt."

It was, Garavaglia concludes, "blackmail, well-orchestrated blackmail."

Three days later, Berlusconi was out and Monti was prime minister. The ECB began buying Italian bonds and the crisis eased. Italy remained inside the euro and the French and German banks were spared the massive losses they would have faced had Italy left the euro and defaulted.

Possibly Garavaglia isn't the most reliable of witnesses. But many in Italian politics, including Berlusconi, believe this version of events. Of course, the ECB says that they operated on strictly financial criteria and within the limit of their statutes in deciding on their bond purchase strategy, and they were doing so at a time of acute financial crisis for the euro.

And indeed, the euro crisis has seemed to ease since that time, above all with the emollient phrase last year of ECB President Mario Draghi that the central bank would do "whatever it takes" by way of buying the bonds of stricken countries like Italy (or Spain, Portugal, Greece, Ireland, Cyprus) to save the euro.

The real question is whether the euro crisis has truly eased. There have been some important improvements in the reform of pensions and other entitlements, and in liberalization of labor markets in Italy, Spain and Portugal. Budget deficits and labor costs are coming down, productivity is rising.

But the price, in unemployment and bankruptcies, political disruption and disillusion, has been very high indeed.

If one single statistic can explain how deep the problem remains in Italy it is that the country's economic output is lower than it was in 2001. Italy has lost 12 years.

Moreover, the value of non-performing loans on the books of Italian banks is greater than the total of Tier 1 capital in all Italy's banks combined.

Italy's economic crisis isn't over. Its political crisis has just been unleashed anew by Berlusconi. The euro crisis thus clambers once more from its unquiet grave. And this time, the German chancellor doesn't have a solid Bundestag majority behind her, the Chinese economy is no longer booming and the U.S. Congress is once more tap-dancing on the edge of the fiscal cliff.

This could get very ugly indeed.