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Italy govt to keep spending in check with regular monitoring: Salvini

Italy govt to keep spending in check with regular monitoring: Salvini

Italy's populist government was poised last night to defy the European Commission, preferring to risk financial sanctions rather than revise its big-spending budget.

The European Union rejected Italy's draft budget, saying it broke the rules, and gave the government until midnight Tuesday to submit a new version.

"The budget will not change, neither in its balance sheet nor in its growth forecast". Deputy-premiers Luigi Di Maio of Five Star and Salvini of the League are, however, determined to start delivering on campaign promises to boost benefit spending, cut taxes and lower the retirement age. He said the government was committed to staying within the 2.4 percent of GDP deficit target.

Last week, the commission predicted that, without corrective measures, Italy's budget shortfall could rise to 2.9% of GDPÂ in 2019 and 3.1% of GDPÂ in 2020.

"Stateless, lawless no-man's lands will no longer be tolerated", Interior Minister Matteo Salvini, head of the far-right League, said as diggers rumbled through the camp, run by the Baobab Experience association.

In its latest multi-year economic targets, in early October, Italy revised up its growth forecasts, with 2019 gross domestic product growth estimated at 1.5 percent.

Italy's Economy Minister Giovanni Tria has accused Brussels of getting its sums wrong.

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"We won't play sly foxes with the deficit", he said. In a nutshell, the Italian budget deficit is projected to be larger than their GDP growth which means that the debt-to-GDP ratio would increase.

European Commission president Jean-Claude Juncker hinted, on the eve of the deadline, that a compromise was unlikely.

Speaking at the European Parliament on Tuesday, German Chancellor Angela Merkel said the EU wanted to reach out to Italy, but that the eurozone will only work "if every individual member fulfills their responsibility for sustainable finances".

"But Italy also adopted the many rules that we now all have in common", she added.

The European Commission "will make the first step to move Italy into EDP" after an update on the debt expected on November 21, said Lorenzo Codogno, former chief economist at the Italian Treasury Department. The higher cost of borrowing means more of the Italian government's income would go to servicing public debt, straining resources and undermining the economic growth the government is banking on, pushing the country into a unsafe spiral.

Uneasy investors have already cost the taxpayer an additional 1.5 billion euros ($1.7 billion) in interest over the past six months.

The fear is that stress in Italy could spread to other European countries which are only just recovering from the eurozone debt crisis.