Italy’s populist government defiantly refused to bow to EU demands to change its big-spending budget for next year, with interior minister Matteo Salvini declaring on Wednesday: “We won’t budge a millimetre.”

Rome now faces the threat of financial penalties being applied by the European Commission as the stand-off with Brussels intensifies, amid fears that Italy that could spark a eurozone crisis that would dwarf the one that engulfed Greece.

In a first for the EU, the Commission rejected the budget last month, saying that it represented an “unprecedented deviation” from the bloc’s spending rules.

Italy was told to go back to the drawing board and come up with a revised budget, but the text sent to Brussels late on Tuesday was little different from the original.

The coalition, made up of the anti-establishment Five Star Movement and the populist, nationalist League, is in no mood to compromise and knows that bashing Brussels goes down well with many voters, as European Parliament elections loom in May.

“We’re working on a budget that will guarantee jobs, greater rights to pensions and less taxes for many Italians. If Europe likes it, we’ll be happy, but if not we’ll plough on regardless,” said Mr Salvini, who is also deputy prime minister. “I can assure you, we will not budge a millimetre.”