The European commission is at loggerheads with Rome after taking the unprecedented step of rejecting the Italian government’s draft budget in a move designed to force the country’s populist government to rein in its spending.

Italy was presented with a three-week deadline to provide a revised financial plan, and the commission’s vice-president, Valdis Dombrovskis, noted that Italy already spent more servicing debt than it did on education.

The commissioner, a former prime minister of Latvia, threatened to begin a procedure that could lead to the EU imposing fines on Italy unless the new government reconsiders. Dombrovskis accused Rome of “openly and consciously going against commitments made”.

“Today, for the first time, the commission is obliged to request a euro area country to revise its draft budgetary plan,” Dombrovskis said. “But we see no alternative … Breaking rules can be tempting on a first look. It can provide the illusion of breaking free. It can be tempting to try to cure debt with more debt. But, at some point, the debt weights too heavy and you end up having no freedom at all.”

Italy’s deputy prime minister, Matteo Salvini, was unrepentant. “We won’t subtract one single euro from the budget,” he told reporters during a visit to Bucharest. “I personally am available to go even tomorrow to meet the president of the European commission to explain how Italy’s economy will grow thanks to this manoeuvre. But no one will take one euro from this budget.”

The Italian government, led by the prime minister, Giuseppe Conte, and made up of a coalition of the anti-establishment Five Star Movement and the far-right League, says it needs €17bn (£15bn) to fund election campaign promises, including tax cuts, a universal basic income and pension changes.

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The reaction of the markets to the commission’s announcement was instant, with the cost of borrowing on international bond markets rising and the Milan stock market falling by 1%.

Italy’s public debt is worth more than 130% of the country’s GDP, the second-highest level in the EU after Greece and more than double the bloc’s limit of 60%.

Italy was allocated €44.7bn between 2014 and 2020 as part of the EU’s stability and growth pact to support the competitiveness of its small and medium businesses, on the proviso that it lived up to fiscal commitments designed to avoid a repeat of the 2007 financial crash. The new government’s proposed budget, however, aims to have a deficit of 2.4% of GDP in 2019, more than three times what it had previously promised.

Dombrovskis said the level of Italy’s debt amounted to €37,000 per inhabitant and that the proposed budget would mean first-time home owners were faced with impossible interest rates on their loans and Italian companies unable to access funds for growth. “The ball is now in the court of the Italian government,” he said.

Pierre Moscovici, the commissioner for economic and financial affairs, said the commission would hold talks with Rome with an open mind. “The opinion adopted today by the commission should come as no surprise to anyone, as the Italian government’s draft budget represents a clear and intentional deviation from the commitments made by Italy last July,” he said.

“However, our door is not closing. We wish to continue our constructive dialogue with the Italian authorities.”

As Moscovici was leaving the press conference, an MEP for the League party, Angelo Ciocca, grabbed the commissioner’s notes and hit them with his shoe. He later tweeted that he had slammed “with a sole made in Italy” a “mountain of lies”.

Moscovici later responded that Ciocca had no respect for his function as a parliamentarian.



