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The ruling parties - made up of the anti-establishment 5-Star Movement and the right-wing Lega - sent shivers through the eurozone after proposing a 2019 deficit that is, at 2.4 percent of gross domestic product (GDP), three times the previous administration's target. The announcement late on Thursday rattled markets on Friday, prompting a sell-off of bonds and a rout of banking stocks. It also set up a clash with the European Commission, which monitors and enforces EU fiscal rules. President Sergio Mattarella, who is separate from the elected Lega and Five Star Movement coalition, hinted he could vote down the budget and order it to go back to Parliament. POUND LIVE: GBP Sterling soars against euro as Italy sends panic through eurozone

Addressing a group at the presidential palace that had marked the 70th anniversary of the constitution, he said the state's founding law requires "balanced budgets and the sustainability of debt”. He added: "This is to protect the savings of our fellow citizens.” A little later at a conference in central Italy, Bank of Italy Governor Ignazio Visco said the country's debt, the largest among big European Union economies at 131 percent of GDP, must not be allowed to increase. He said: "Italy needs to favour public and private investment and to contain and reduce public debt.”

Luigi di Maio said those who had imposed austerity on Italy were thieves

The debt must be "put on downward path”, he added. Matteo Salvini, leader of the League and also a deputy prime minister, responded to Mr Mattarella by saying that years of Brussels-imposed austerity had driven up debt. In a statement he said: "Be calm Mr. President. "Years of budgets imposed by Europe have made our public debt explode... finally we are changing course and betting on the future and on growth."

Luigi di Maio celebrates on a balcony of Chigi Palace after passing Italy's budget