Far-right Deputy Prime Minister Matteo Salvini on Tuesday insisted Italy would stick to its budget despite the European Commission rejecting it for increasing the deficit, Italian media reported. "This is the first Italian budget that was written in Rome and not in Brussels".
Italy's government of the right-wing League and anti-establishment 5-Star Movement has been locked in a dispute with Brussels over fiscal issues and presented a budget plan this month that hikes the deficit to 2.4 percent of gross domestic product.
The move risks triggering a new crisis for the euro.
Commission Vice-President for the Euro Valdis Dombrovskis said Italy's response to the commission's concerns was "not sufficient" to assuage fears and the euro's rules were the same for everybody.
Italian bonds will tell the story with Italian yields trading just below 3.50%.
Italy's government said it would stick to a deficit of 2.4 per cent of annual economic output next year, which would be triple the amount forecast by the previous government and approach the European Union limit of 3.0 percent.
In a letter sent to the EU Monday, Italian finance minister Tria said he wants "constructive" talks with the EU but coalition leaders have shown little willingness to compromise aside from pushing some spending plans a year out.
A spokeswoman for the economy ministry in Rome defended the expansionary budget and said Italy stuck by its position that the only way to cut public debt was by boosting economic growth. But it believes additional spending through a higher deficit would boost growth, helping reduce the debt-to-GDP ratio.