There are mounting fears around the future of the EU, ahead of tomorrow’s Brussels-imposed deadline for Italy to submit a revised budget. The European Commission rejected Italy’s 2019 budget last month, claiming it violated a commitment to lower the country’s deficit. However, according to reports, Italy looks likely to submit a very similar budget, which could spark an unprecedented crisis for the EU.
Leading economist Daniel Lacalle told CNBC’s Squawk Box that Italy will “win” in its battle with the EU – and this could doom the future of the bloc.
Mr Lacalle said: “The Italian budget is a problem for the eurozone. It creates a contagion effect with other economies.
“There has been problems in Spain, in France, in Portugal, in Slovenia.
“The showdown between the Italian government and the EU will likely be won by the Italians.
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“The EU doesn’t want to create an image of being too tough while bringing them to a level of logic.
“But the budget is illogical. The spending is too optimistic and the revenue side is impossible.
“The problem the EU is facing with budgets is with completely impossible revenue estimates.
“Unfortunately, if the EU becomes more benign with Italy then it creates a domino effect to Spain, to Portugal and then it creates a problem with debt and the spreads are rising.”
Mr Lacalle suggested that if the EU gives in to Italy when the deadline ends tomorrow, then the entire future of the bloc and even a eurozone crisis could be on the cards.
The Italian interior minister Matteo Salvini has already suggested that his country will not back down in face of pressure from Brussels.
In remarks to a group of students on the weekend, Mr Salvini hinted that the EU “will not like” how he responds to the budget deadline.
The Italian newspaper La Repubblica confirmed this, with reports that the populist Italian government is set to stick to its disputed deficit of 2.4 percent for 2019.