Italy's PM Conte sees no room to change 2019 budget plan

REUTERS  Lisi Niesner

"I have read Oettinger's comments and I repeat that they should stop invading our field and just let the Italian government work", Deputy Prime Minister Matteo Salvini said on Facebook. Salvini said the League-5-Star Movement government was not going to be pushed around, amid criticism from the European Commission of its plan to allow Italy's budget deficit to rise to 2.4% of GDP next year.

European Union leaders imposed sanctions in 2014 to penalise Russian Federation for annexing Crimea from Ukraine and backing rebels fighting government troops in the east of Ukraine.

European Commission officials have expressed dismay and frustration at Italy's rebellious stance over spending but the coalition is largely unrepentant about its plans, throwing down the gauntlet to Brussels. "Unfortunately, the deterioration in diplomatic relations between the U.S., some European countries, and Russian Federation is a complicated problem for Italy, which depends on its membership of certain worldwide structures like the European Union and North Atlantic Treaty Organisation". Italy's budget puts its economy minister, Giovanni Tria - seen as a moderate influence in the coalition - in a hard position as he has pushed for lower spending but was overruled by the coalition leadership. "On the strength of this position, we go to Brussels with a budget that we are proud of and that we want to discuss without prejudices".

The Italian government is also set to introduce a more punitive tax regime for banks, heightening pressure on a sector that is suffering due to a spike in the country's debt costs under the populist government. One of the key forecasts in the budget is that Italy's high debt to GDP ratio, of around 130 percent now, will decline to 126.7 percent of GDP in 2021.

Italy asked France for "clarifications" after witnesses reported seeing a French police van cross the mountain border at Claviere, near the Italian ski resort of Sestriere, and officers making two men get out in a wooded area before driving back the short distance to France.

Alessandro Tentori, chief investment officer for Italy at Axa Investment Managers, told CNBC Tuesday that there was so far little detail in the budget about growth and investment projects. "I don't think it will happen, but the result of such erroneous speculation can be very bad". This would set the scene for a serious clash between the European Union and Italy.

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