NAPLES, Italy — Italy’s desperate need for a financial shot in the arm is palpable at all levels of the economy, from the entrepreneurs in the industrial north who are hungry for tax breaks and a streamlined bureaucracy to the welfare seekers in the poverty-stricken south, with its dizzying levels of youth unemployment.

But how best to invigorate the Italian economy has reanimated a wrenching debate for Europe over whether to spend or cut in the face of financial peril. On Tuesday, Italy is expected to resubmit a largely unchanged and high-spending budget to the European Union, which is expected to reject it, for a second time, and begin the rare process of punishing a founding-member nation with penalties in the billions of euros.

The argument has haunted Europe since the financial crisis of 2008, of which the consequences, including uneven recoveries and persistent economic inequality, continue to ripple through southern Europe. Italy’s populists came to power in part by blaming Brussels for stifling their economy with strict budget rules. The budget from Rome is the first real, and not just rhetorical, assault on the establishment order of the bloc.

The question is whether the budget is a serious stimulus plan or a bank-breaking populist giveaway larded with tax cuts, pension benefits and welfare programs that neither Italy nor the European Union can afford. A crash of the Italian economy, one of the largest in the bloc, could sink everyone. Doubts among investors have already caused an increase in the yields of 10-year government bonds — an indication that markets view Italy as a riskier country to lend to.