Italian Finance Minister Giovanni Tria. Photo: AFP/Alberto Pizzoli
Italian Finance Minister Giovanni Tria. Photo: AFP/Alberto Pizzoli

The European Commission is poised to reject a member state’s budget for the first time ever, which would trigger a period of uncertainty as Rome and Brussels presumably will enter negotiations.

Last week, the EC said a draft proposal for Italy’s budget represented an “unprecedented” violation of European Union rules, after which officials in Rome convened an emergency cabinet meeting on Saturday.

There was some speculation that Italy’s populist coalition might be willing to reduce its deficit target to appease Brussels and calm the markets, which have seen a selloff in Italian government bonds deepen amid the budget uncertainty.

But defiance on the part of Italian Deputy Prime Minister Luigi Di Maio forced Finance Minister Giovanni Tria reluctantly to submit a letter to the EU that sticks with the original proposed deficit target of 2.4%, as reported by Italian daily Il Foglio. Tria had pushed the populists to reduce the number to 2.1%, to no avail.

Despite Rome’s intransigence on the budget issue, Italian government bonds rallied, possibly because of Di Maio’s reassurances on Monday that his government has no intention of leaving the euro.