Italy-EU debt row risks boiling over after Conte takes sides with Salvini

As the two sides brace to collide yet again, Mr Conte said he agree with deputy prime minister and far-right leader Matteo Salvini, who is calling for significant tax cuts. Mr Salvini has threatened to bring down the Italian government should his proposals not be met. By agreeing with his deputy, Mr Conte risks adding more fuel to the fire of the Italy-EU budget spat, with the European Commission already stating they oppose wide tax cuts if they are not offset by new revenues or spending reductions. Mr Conte told a news conference: “Salvini’s ideas are the same as mine, but I am perhaps more ambitious.”

He added the reform should be based on the principle that taxes should be lower, but everybody should pay them.

In another blow to his EU partners, Mr Conte said he could not conceive of progress in eurozone reforms unless Italy’s interests were properly taken into account.

Leaders of the 19-country currency bloc agreed on Friday at a summit in Brussels to move ahead with a small eurozone budget and a reform of the eurozone rescue fund, the European Stability Mechanism.

Italy wanted progress on the establishment of a common insurance scheme for bank depositors but no agreement is in sight.

The ESM reform is important to Germany as it would increase the bloc’s monitoring powers over countries with economic imbalances and also facilitates the restructuring of governments’ debts in crises – a potential cause of higher yields for highly indebted nations.

Mr Conte said after the summit: “The three projects are interlinked.

“It’s obvious that if you make a concession, then you have to get something in exchange.

“I cannot imagine that a reform supported by some countries go ahead, while that backed by Italy is blocked.”

Leaders have set a December deadline to make progress on the eurozone reform.

Italy this week responded to the Commission after finance chiefs threatened disciplinary action unless Rome can explain how it plans to reign in spending and lower their deficit forecast.

A spokesman for Prime Minister Giuseppe Conte told Italian newspaper Il Sole 24 Ore that a letter has been sent back to the Commission, asking the EU to review finance rules that govern the union.

The letter also confirmed Italy’s commitment to respecting European regulation when it comes to maintaining levels of debt.

The Commission has urged Rome to make its debt more sustainable by cutting its structural deficit.

Italian debt now stands at 132 percent, and is the second largest in the eurozone after Greece.

The Commission forecast this figure will rise further to 135 percent next year.