The European Commission has taken the first step towards sanctioning Italy over its national budget in an ongoing row over the country’s finances.
In October, the EU executive body rejected Italy’s draft budget and told it to make changes – an unprecedented event in European politics.
Italy, however, said it would stick to its high-spending goals.
On Wednesday, the Commission said formal proceedings that could bring financial sanctions were “warranted”.
Commission Vice-President Valdis Dombrovskis said: “With what the Italian government has put on the table, we see a risk of the country sleepwalking into instability.”
He said that the EU’s disciplinary measure known as “excessive deficit procedure” (EDP) was now appropriate.
Italy’s populist-led government had already been told by the Commission to revise its budget, because of the high level of national debt, which eurozone officials worry could cause instability for the entire bloc.
But the Rome government failed to make significant changes, putting the country on a collision course with Brussels.
Under the rules of the sanction procedure, potential consequences include a fine of 0.2% of GDP – which for Italy’s economy would cost billions of euros – and a halt on the payment of any development funds.
However, the process could take a long time, and Mr Dombrovskis said he was still open to talks with Italy on how to address the disagreement.
Italy’s deputy prime minister, Matteo Salvini, told reporters he remained convinced about his government’s budget plans, and that “we will talk about it in a year’s time”.
How did we get here?
Italy’s current government took office in June 2018 and is a coalition of the anti-establishment Five Star Movement and right-wing League.
Widely seen as a populist coalition, the first national budget of new government was hammered out in September,
The problem for EU officials was its high cost for a country facing massive debts. The government planned to rack up a budget deficit of 2.4% of GDP to finance its plans.
The Commission had hoped for a lower budget cost as the previous government’s plans were for a 0.8% deficit.