EU’s rejection of Italy’s budget escalates tensions in standoff

BRUSSELS — The European Union set up a highstakes battle with Italy, one of the bloc’s biggest economies, over who has final control over a member state’s budget after the executive Commission took the unprecedented step of ordering the country to revise its public spending plans.

In a move that escalates a monthlong standoff, the EU said the populist government’s budget for next year is out of line and breaks earlier promises to lower public debt.

Italy’s debt load is the second-highest in Europe, after Greece, and there are worries that losing control of spending could rekindle financial turmoil in Europe. The populist Italian government says the sharp increase in spending is needed to jumpstart growth after years of malaise.

The confrontation laid bare the fundamental problem within the eurozone where 19 nations share a currency, yet governments maintain autonomy over spending priorities and the EU has been reluctant to enforce spending limits.

Since the euro economy can be destabilized if one member state loses control of its finances, as Greece did a decade ago, the other nations want to have some say over excessive spending, especially when it concerns the region’s thirdbiggest economy.

The EU Commission said it had no choice after Italy proposed a deficit of 2.4 percent of GDP for next year — three times more than what it had previously targeted. The higher deficit means Italy would not fulfill its promise to lower its debt, which is over 130 percent of GDP and more than twice the EU limit of 60 percent.