Italy's Salvini warns EU as budget deadline looms

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Sparring between Rome and Brussels intensified at the weekend ahead of a Tuesday deadline that could lead to the European Commission launching disciplinary measures against Italy.

The European Union and Italy's Five Star-League coalition have been at odds since the government was formed in June, with disputes over migration followed by a row over the Mediterranean country's budget plan.

"Some EU member states don't care about migrants and dump them on us, while Brussels is threatening sanctions over our budget. We will not be intimidated," Italian Deputy Prime Minister Matteo Salvini warned on Saturday.

Italy's Deputy Prime Minister Matteo Salvini tweets that his country "will not be intimidated," November 10, 2018. /Twitter screenshot

Salvini, interior minister and leader of the League, went a step further on Sunday, threatening to block "European budgets and activities."

The deputy prime minister lashed out after alleging that Maltese authorities helped a migrant boat journey to Italy by giving its occupants life vests and a compass, in what he described as a "hostile act." He also claimed migrants were being helped over the border from France to Italy.

"We have shown that we know how to defend our borders and, in the eventual case it is necessary, we will also show that we can block European budgets and activities as long as Europe and some individual countries jerk the Italian people around," the Ansa news agency quoted Salvini, who recently hinted he could run for the presidency of the European Commission, as saying on Sunday.

Italy's Deputy Prime Minister Luigi Di Maio (L), Prime Minister Giuseppe Conte (C) and Deputy Prime Minister Matteo Salvini, pose after a cabinet meeting in Rome, Italy, October 20 2018. /VCG Photo

The warning came ahead of a Tuesday deadline, set by the Commission, for Italy to publish a revised fiscal plan for 2019.

The Commission last month rejected an initial budget proposal, the first time it has sent back a member state's plan, saying it failed to honor a commitment to lower the deficit and guarantee a reduction in the country's debt.

Eurozone rules dictate that members should keep their budget deficit under 3 percent of gross domestic product and their public debt under 60 percent.

The Italian plan includes a budget deficit of 2.4 percent of GDP – which the Commission fears is unrealistic – and Italian public debt stood at around 131 percent of GDP in 2017, the second highest in the EU behind Greece.

There are fears that failure to reduce the debt could lead to renewed instability in the economic bloc, and Italy's major banks, which hold significant amounts of government bonds, have suffered a 25 percent-plus average share price drop this year.

Italian Economy Minister Giovanni Tria (L) and Eurogroup President Mario Centeno arrive for a joint news conference at the treasury ministry in Rome, Italy, November 9, 2018. /VCG Photo

The Commission could launch disciplinary steps against Rome later this month if its demands are not met, with a possible fine running into billions of euros.

The Italian government has so far insisted it will now bow to the EU's demands, but Reuters was one of several outlets to report on Sunday that Italian Economy Minister Giovanni Tria is considering a cut to the 2019 growth forecast of 1.5 percent.

Tria is reported to believe cutting the estimate would convince Brussels that Italy would not go above the targeted deficit of 2.4 percent of GDP in 2019. The EU forecasts 1.2 percent growth in Italy's economy next year.

Italy's other deputy prime minister, Luigi Di Maio, leader of Five Star, "guaranteed" on Friday that cuts plus investment growth would ensure the country remains within its deficit target.