An incoming populist government in Italy may no longer be looking to ditch the euro currency, but this risk cannot be totally ruled out, one analyst told CNBC Monday.
The agreement between the right-wing Lega and the left-wing Five Star Movement (M5S) is raising concerns for market participants. This is due to higher spending plans and a potential clash with Europe over budget rules.
Another contentious point has been the idea to hold a referendum on Italy's membership of the single currency — which both parties mentioned in the run up to the March election. Though such a step does not feature in their recent coalition agreement, some analysts have not completely ruled out such a possibility.
Speaking to CNBC's "Squawk Box Europe" Monday, Federico Santi, Europe analyst at research firm Eurasia Group, said he believes that Italy has learned a lesson from Greece.
"I think they realize — at least the current leadership — that a confrontational approach to the EU and the markets is ultimately self-defeating," he said.
"I think the problem is, before we get to a point where they come to terms with the constraints that any Italian government has to face in terms of economic policy, they could cause plenty of trouble," he added, iterating that there was still a chance that a euro zone referendum could come back into play in the future.