EUROZONE WARNING: Brexit would be NOTHING compared to devastating Italy financial CRISIS

German economist Clemens Fuest described Italy as the “bigger problem, particularly in the medium term” as he claimed the impact of Brexit would be only a “short-term issue”.

Italy has sent the eurozone into meltdown and the euro currency floundering after announcing its spending plans which include a deficit target of 2.4 percent for 2019.

The budgetary measures enraged European Commission (EC) chiefs, who sensationally rejected the fiscal plans after claiming they breached previous spending agreements.

Italy has so far refused to change the budget until being given the chance to put their spending plans to the test and monitor the results.

Speaking today, Mr Fuest said: “If Italy ends up in a financial crisis that could be a big thing, a big problem for the eurozone and the whole of Europe.

“Italy is the bigger problem, particularly in the medium term. Brexit is more of a short-term issue.”

However, Italian deputy Prime Minister Matteo Salvini today signalled Rome could buckle to EU demands by lowering its controversial deficit budget.

Speaking to newswire AdnKronos today, the deputy Prime Minister hinted the standoff between the two sides could soon subside as he declared the deficit target could be moved.

It comes after repeated refusal from Rome to alter the budget, after leading government figures claimed the spending measures were in the best interest of Italians.

Mr Salvini said: “I think nobody is fixated on this, if there is a budget which makes the country grow, it could be 2.2 percent or 2.6 percent.

“The problem is not about decimal points, it’s a question of seriousness and being concrete.”

Mr Salvini is braced for a meeting with Prime Minister Giuseppe Conte, Finance Minister Giovanni Tria and fellow deputy Prime Minister Luigi Di Maio today to discuss the budget.

Up until now, Italy’s populist coalition government, comprised of Five Star Movement and League, said it will only consider revising the budget after being given the chance to make the proposals work.

Speaking today, Prime Minister Conte refused to discuss “decimal points” and vowed to wait until expert assessment on the impact of the proposed reforms before deciding on changing the budget.

He said: “At that point we’ll have the exact economic impact of these measures, down to the euro, and we’ll then be able to decide on returning to Brussels and continuing the negotiation.”

Europe stocks were boosted today upon the news, with the pan-European STOXX 600 up by 1.2 percent as of 11:00 GMT.

At the same time of trade, in Italy the FTSE MIB was up more than 500 points for a 2.7 percent boost.