BRUSSELS (AP) — The European Union set up a high-stakes battle with Italy, one of the bloc’s biggest economies, over who has final control over a member state’s budget after the executive Commission took the unprecedented step of ordering the country to revise its public spending plans, reports Associated Press.

Left to right: vice premier Luigi Di Maio, premier Giuseppe Conte and vice premier Matteo Salvini, pose as they arrive for a press conference at Chigi’s Palace, in Rome, Saturday, Oct. 20 2018. Italy’s government vowed Saturday to engage in constructive talks with the European Union as it still gave final approval to a rule-busting budget and brushed off a ratings downgrade triggered by its higher-than-expected deficit targets. (Angelo Carconi/ANSA via AP)

In a move that escalates a monthlong standoff, the EU said the populist government’s budget for next year is out of line and breaks earlier promises to lower public debt. Italy’s debt load is the second-highest in Europe, after Greece, and there are worries that losing control of spending could rekindle financial turmoil in Europe. The populist Italian government says the sharp increase in spending is needed to jumpstart growth after years of malaise.

«We see no alternative but to request the Italian government to revise its draft budgetary plan,» EU Commission Vice President Valdis Dombrovskis said. Italian Deputy Prime Minister Matteo Salvini was quick to warn the EU to keep its hands off. «No one will take one euro from this budget.»

The confrontation laid bare the fundamental problem within the eurozone where 19 EU nations share the same currency, yet governments maintain autonomy over spending priorities and the EU has been reluctant to enforce spending limits.

Since the euro economy can be destabilized when one member state loses control of its finances, like Greece did a decade ago, the other nations want to have some say over excessive spending, especially when it concerns the region’s third-biggest economy.


The EU’s executive wants the Italian government to produce a new budget proposal within three weeks. Italy argues the spending increase is needed to get growth going and fulfil electoral promises. The extra money will be spent on restoring pensions to as many as 400,000 people whose retirement age had been pushed back and on a basic income for some job-seekers.

«We know that we are the last line of defense for social rights of Italians. And for this we won’t let you down. We know that if we would give up, that the experts for the banks and austerity would return. So we will not give up,» Deputy Premier Luigi Di Maio wrote on Facebook.

The hard-line stance of the two populist leaders, Di Maio and Salvini, to some degree defies a more conciliatory position by the country’s premier and economy minister, who have said they wanted to sit down and discuss the budget with the EU Commission.

But both also have something to gain with their voter base by leveraging a confrontation with the EU, which has been seen as the bogeyman requiring austerity cuts in recent years. European parliament elections loom in the spring and Di Maio and Salvini are jostling to gain influence before then.

Markets were quick to punish Italy over the dispute, with the government’s cost of borrowing on international bond markets rising and the Milan stock market falling 1 percent. Barry reported from Milan for Associated Press.

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