Italy's government says it will stick to a deficit of 2.4 percent of annual economic output next year, which would be triple the amount forecast by the previous government and approach the European Union limit of 3.0 percent.
In 2015, the Commission presented guidance on how it will apply the existing rules of the Stability and Growth Pact to strengthen the link between structural reforms, investment and fiscal responsibility in support of jobs and growth, which was later translated in to a "Commonly agreed position on Flexibility within the Stability and Growth Pact" and endorsed by the Council in 2016.
While actual sanctions are still improbable and wouldn't be levied for months, European officials have been wary of handing ammunition to Italy's euroskeptic government that already waged one successful election campaign by blaming the EU for numerous country's ills.
The European Commission on Tuesday will discuss the Italian budget at a meeting of commissioners.... the first formal step of a procedure that could end in the rejection of Italy's budget plan and imposition of fines on the country.
"Linkages through the banking system tie Italy closely to its European partners", said Holger Schmieding, chief economist at Berenberg bank.
"The eurozone is built on close bonds of trust. with rules that are the same for everyone". He said "we have been tasked by all member States with maintaining the common commitments", it is "our duty", because "confidence is crucial".
Sputnik: Generally speaking, the situation in Italy is a very high level of debt right now. The cost of servicing Italian public debt is already equal to the country's entire spending on education - 65 billion euros a year.
"Breaking rules can be tempting on a first look". "Many of the country's banks hold large amounts of Italian sovereign debt relative to their capitalization".
At the heart of Italy's arm wrestle with the Commission are promises made by the two populist parties during this year's election. However, our door is not closing: we wish to continue our constructive dialogue with the Italian authorities.
One Italian politician, Angelo Ciocca, made his distaste for Moscovici's comments clear by snatching the Commissioner's notes after he left and whacking them with his shoe. Ciocca wrote on Twitter.
A major concern for the euro area is Italy's public debt burden that would only increase thanks to the planned boost in spending by Italy's populist governing coalition.
In commodities, United States crude futures were 0.23 per cent higher at $66.58 per barrel after dropping roughly 4 per cent on Tuesday to a two-month low of $65.74.
Italy's new coalition government is part of a growing wave of global populism that spells fiscal irresponsibility. It wants to kick-start Italy's sluggish economy with a basic income for the poor and tax cuts for corporations.
In a radio interview with RTL 102.5, Salvini insisted the expansionary budget, which raises the deficit next year to 2.4 percent of gross domestic product from a targeted 1.8 percent this year, was the only way to lower the public debt. And these are no idle boasts from Italy's firebrand leaders: the Commission is playing a unsafe game because Italy - the third largest economy in the single currency - has the potential to play havoc with the stability of the eurozone. The figure is well above the EU's limit of 60%.
While any actual European Union sanctions against Italy are still improbable and wouldn't be levied for months, the rejection of the country's budget could strain the governing coalition in which Conte stands as mediator between powerful deputy premiers Matteo Salvini of the League and Luigi Di Maio of the Five Star Movement. I am not surprised.