Flags of Italy and the European Union. Photo: iStock

A sell-off in Italian government debt, spurred on by a contentious budget plan crafted by the ruling populist coalition in Rome, continued Thursday when the European Commission rejected the proposal as a violation of EU rules.

But the selling eased on Friday after EU economic commissioner Pierre Moscovici tried to defuse tensions, saying: “We have no interest in creating new tensions. The ball is now in the court of the Italian authorities, who will reply to us by Monday.”

Italian daily Il Foglio reported on Friday that the government in Rome may be willing to sacrifice some political face and cut the deficit target from 2.4% to 2.1% of GDP.

An emergency meeting of Italian ministers is scheduled for Saturday afternoon, where Italian Prime Minister Luigi Di Maio will weigh his options for compromising on the budget.

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