The budget of Italy is unsettling the Eurozone

Italy's proposed budget at odds with EU limits | Money Talks

Debt Conflict: European Commission Rejects Italian Draft Budget

Italy's coalition government submitted its draft 2019 budget to the European Commission on Monday and the EU executive is widely expected to raise its concerns later this week. In an interview with Italian journalists by the head of the European Commission added that if Italy does not comply, it may cause a violent reaction of its European partners. The deficit will come as a result of measures such as the introduction of a monthly income of up to 780 euros ($905) for low-income citizens and the lowering of Italy's retirement age.

"If we were to accept everything that the Italian government offers us, we would have counter-political backlash in other countries of the euro area", has already warned Mr Juncker, pointing out the" gap between what was promised and what is presented today". This is three times more than the 0.8 percent that the Italian previous government had agreed with the European Commission, and it could become even more, as the 2.4 percent forecast is based on the Italian government's highly optimistic assumptions about economic growth.

"We are keeping all our promises, we are very happy with this budget", Conte told reporters Monday evening. European Union officials hope that during that period the government will be open to talk with the European Union and make adjustments to its budget, though they concur that a lot will depend on how investors react to this standoff and the willingness of the country's leadership to cave in to market pressure. Last week, Italian stocks briefly slipped into a bear market, and while they have rebounded a little, they remain subdued - although Italy's benchmark share index, the FTSE MIB is more than 1% higher on Tuesday. We could know within the week what Europe thinks.

"Europe works according to pre-established rules before the arrival of governments", Juncker said.

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At the summit, Austrian Chancellor Sebastian Kurz said fiscal rules should be respected by all, adding: "Too much debt is unsafe".

"I think it will be very hard for Economy Minister Tria or Minister Savona (Italy's minister for European affairs) to argue with Brussels that they are going to boost growth as they're projecting it".

The Italian government is also set to introduce a more punitive tax regime for banks, heightening pressure on a sector that is suffering due to a spike in the country's debt costs under the populist government.

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