Euro zone finance ministers have called on Italy to change its 2019 budget before a deadline set for next week to conform with European Union rules, but Rome has dug in its heels saying its disputed deficit plan would not change.
Italy sparked an unprecedented clash with the EU last month when it presented a draft 2019 budget that envisages an increase in the structural deficit by 0.8 per cent of GDP next year rather than the decrease by 0.6 per cent of GDP required by EU rules.
The draft was rejected by the European Commission and a meeting of euro zone finance ministers showed Rome isolated on the issue, with ministers worried that the higher borrowing and spending plan threatened the single currency itself as well as deeper euro zone integration.
Italy has until November 13 to send in a revised draft 2019 budget to Brussels.
But its ruling coalition leaders repeatedly excluded any possibility of changes to the budget, saying higher borrowing was needed to kick-start growth.
Italian Economy Minister Giovanni Tria made clear that the main assumptions of the budget would not change though he stressed that Italy expected its public debt, at above 130 per cent of GDP, to fall thanks to the growth stimulus of the budget.
An Italian official said Rome was working for a compromise, meant mostly to reduce market pressure on Italian bonds, but did not clarify how differences could be narrowed.
If Rome does not amend the budget to match EU rules, the Commission is likely to launch a disciplinary procedure which could lead to fines and suspension of EU funds.
Euro zone ministers said before the meeting that the fiscal plans of Italy, the euro zone's third biggest economy, affected the common currency shared by 19 countries as well as their plans for deeper economic integration.
"What is at stake now is our common currency," French Finance Minister Bruno Le Maire said.
