European Union REJECTS Italy budget in unprecedented action – EU-Rome relations ON BRINK

The bloc’s budget chief rejected the plans as he declared “public debt is the enemy of the people” as he justified their action against Italy’s populist government.

The European Commission was keen to warn Rome against any illusions of “breaking free” with its fiscal stimulus programme, which involves running their budget at a larger deficit.

After careful consideration, Brussels’ powerful executive says Rome’s plan present a “serious deviation” from recommendations set by the European Council in July.

The Commission has asked Italy to submit a revised draft budget for 2019 within three weeks. Brussels bosses argue the proposal poses “serious non-compliance” with the bloc’s tight fiscal policies.

Pierre Moscovici, the EU’s finance chief, said: “The opinion adopted today by the Commission should come as no surprise to anyone, as the Italian Government’s draft budget represents a clear and intentional deviation from the commitments made by Italy last July.

“However, our door is not closing: we wish to continue our constructive dialogue with the Italian authorities. I welcome Minister Tria’s commitment to this end and we must move forward in this spirit in the coming weeks.”

Italy’s populist government, made up of right-wing Lega and anti-establishment Five Star Movement, are planning to run their budget at 2.4 percent of GDP as of 2019.

Brussels has rejected the plot as they fear Italy’s growing public debt is a potential contagion for a Eurozone financial crisis.

This is the first time the EU has used its strict austerity rules to refuse a national budget since they were introduced in 2014.

Valdis Dombrovskis, the EU commissioner in charge of the euro, added: “The euro area is built on strong bonds of trust, underpinned by rules that are the same for everybody. It is our job and duty to uphold common interest and mutual commitments taken by the member countries.

“Italy’s debt is among the highest in Europe, and Italian taxpayers spend about the same amount on it as on education.

“In this spirit, we see no alternative but to request the Italian government to revise its draft budgetary plan for 2019, and we look forward to an open and constructive dialogue in the weeks to come.”

Italian prime minister Giuseppe Conte has insisted he has no back-up plan for the budget after the EU demanded to alter his country’s spending rules.

He said: “There isn’t any B plan.

“I said that the deficit at 2.4 percent of GDP is the cap. I can say this will be our cap.”

The rejection comes as a result of months of tensions between Rome and Brussels over whether Italy’s plans are in breach of EU rules.

EU officials have been cautious about potential sanctions in order to avoid arming the eurosceptic Italian coalition, which successfully blamed the EU to propel themselves into power.

The Commission has asked Rome to submit a new budget, which is closer to the previous Italian administrations deficit goal of 0.8 percent and works towards lowering their €2.3 trillion debt pile.

Eurozone members are expected to not run an annual deficit greater than three percent of GDP.

But Rome’s mounting debt has caused concerns in Brussels, resulting in the demands for Five Star and Lega to balance the books.

If Italy refuses to reconsider its budget, the EU’s next step would be to open an “excessive deficit procedure” that could end with financial sanctions in 2019.

But it is unlikely the sanctions would ever come into force at the risk of fuelling further populist revolt in the region.