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. At 1100 GMT it traded 0.1 percent up on the day at $1.1464.Italy is the third-largest economy of the 19-country euro zone, and a crisis there could unsettle the entire bloc.
"I cannot imagine the euro without Italy and Italy without the euro, " Moscovici said after his meeting with Tria during which he delivered the letter.
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.
Di Maio alleges that the draft budget contained unauthorized language extending a tax amnesty to Italians' assets overseas, a measure that the 5-Star Movement says would benefit organized crime or tax cheats hiding money overseas.
"We don't want to have any type of fight, we are not interested in an escalation. market operators will be reassured by constructive dialogue", he said. The ratings firm also added that the government's policy proposals did not offer a set of reforms that could lift Italy from its anemic economic growth.
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The draft Italian budget is extremely concerned in Brussels. The EU has limits for member states' deficits and debt levels.
The government's budget plan targets a decrease of the deficit to 2.1 per cent in 2020 and 1.8 per cent in 2021.
Deputy Prime Minister Luigi Di Maio, who heads the Five Star Movement, blamed Brussels for the movement, saying in a video posted on his Facebook page that the spread widened "because the markets think that the government is no longer united". He said the main concerns revolve around the higher deficit, Italy's debt load and the possibility for growth.
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.
Conte said on arrival at the European Union summit that the budget plans boost welfare spending, cut the retirement age and hike the deficit, and acknowledged they were unlikely to please the commission. The 5-Star Movement opposes such a move as it risks laundering "corrupt or mafia capital".
Giuseppe Conte also faced discontent over the 2019 fiscal plan at home, calling a meeting of the government for Saturday to stave off an emerging internal rift over conditions of a partial tax amnesty.
Matteo Salvini, the leader of the League party, called the accusation "surreal".