Italy agrees on budget plan, expects rejection from European Union on Tuesday - Italianmedia

Italy agrees on budget plan, expects rejection from European Union on Tuesday - Italianmedia

Italy agrees on budget plan, expects rejection from European Union on Tuesday - Italianmedia

But he has warned that Italy's populist coalition government was "not scared" of using its veto powers in the European Union as a "last resort" to push the bloc into lifting sanctions against Russian Federation.

Moscovici told reporters that European partners want to see Italy remain "firmly in the center of Europe", and that Italians themselves consider the euro currency "very important".

Italy's banks are reeling from the impact on their capital levels of soaring government bond yields, which touched a five-year high on Friday.

Italy's Prime Minister defended its free-spending budget on Thursday, brushing off criticism from Brussels as the European Commission stepped up pressure over a draft it labelled an unprecedented breach of EU fiscal rules.

The government's budget plan prompted a credit downgrade by worldwide credit rating agency Moody's on Friday, which cut Italy's sovereign debt rating to one notch above junk status.

Moscovici called the difference "unprecedented".

Political analyst Wolfango Piccoli of Teneo Intelligence said the commission is facing a tough dilemma and must walk a fine line with Italy's budget.

But he also said the commission would not interfere with Italy's choices, saying its role was one of "a referee, not an adversary, of Italy".

He joined other government members in efforts to dispel concerns about Italy's euro membership.

The letter was delivered by European Union economics chief Moscovici during a meeting in Rome with Italian finance minister Giovanni Tria on Thursday. The two have argued that Italy needs the extra spending to help boost economic growth.

Moscovici said Italy would be treated like any other member state, adding: "I can not imagine a Europe without Italy or Italy without Europe".

Analysts say Rome is in a good bargaining position, given the Eurozone's ongoing difficulties with Brexit. "In contrast, a more lenient approach would further undermine the credibility of the EC's tortuous fiscal rules and irritate some member states from Northern Europe".

The cabinet meeting was called in part because Di Maio had claimed that unauthorized changes were made to the draft budget, involving a proposal to extend a tax amnesty on money held overseas and brought back to Italy.

Luigi Di Maio, the head of the 5-Star Movement, on Thursday threatened to lodge a formal criminal complaint.

The diplomatic push in Brussels coincides with a visit of Italy's far right Deputy Prime Minister Matteo Salvini to Russian Federation on Wednesday, the second since he was sworn in four months ago.

Luigi Di Maio told a late-night talk show that the draft presented to the Italian president contained a proposal to extend a tax amnesty on money held overseas and brought back to Italy.

The anti-establishment 5-Star has always opposed amnesties - a frequently used policy in Italy where people or companies can avoid being pursued for tax dodging by paying a fee.

Salvini, who leads Italy's co-ruling League party, is an admirer of Russian President Vladimir Putin and has rejected allegations of Russian meddling in Western elections.

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