The ongoing contention between the European Union and the Italian government was escalated after the European Commission wrote a letter to the Italian economy and finance minister Giovanni Tria about the Italian budget. The letter stated that Italy's budget proposal, which was initially announced in September was in contravention of the EU's budget regulations.
In addition, the letter also noted that the budget proposal could even see it being rejected by the EU. The budgetary proposal, which is the first for the newly-formed Italian government listed that the budget deficit to about 2.4% of the country's Gross Domestic Product (GDP) which is below the EU's mandated 3% threshold.
However, given that Italy has a debt of around 130% to its GDP – which is second only to Greece in the EU – the budget proposal was heavily criticised by the EU commission. In its letter to the Tria, the EU commission also noted that the budget plans had allocated for an increase in the government spending for 2019 at 2.7% whereas the EU had only allocated an increase in the government spending of only about 0.1%.
Moreover, the letter also spoke about the budget deficit which, on the basis of the Italian budget plan, would increase to about 0.8% of the country's 2019 GDP even as the EU has allocated the country's potential budget deficit to only about 0.6% of its 2019 GDP.
Tria and the Italian government have a deadline of 22nd of October, Monday to revert with their response. If the Italian government doesn't make the necessary changes, the EU has the authority to ask the government to revise the plans in order to comply with its mandate.
If that were to happen, it would be the first time that the EU commission will have enforced this stipulation since it was given the authority to vet budget proposals of member countries in 2013.