Italy risks $4bn EU penalty for Failure to curb debt

The European Commission is considering proposing a disciplinary procedure for Italy next week over its failure to rein in debt, which could pave the way for a 3.5 billion-euro ($4 billion) penalty, Bloomberg reports, citing an official source familiar with the matter.

The step could come as part of the European Union’s regular budget monitoring process, most likely on June 5, and would mark an escalation of Rome’s budget tussle with Brussels that roiled markets at the end of 2018. The official asked not to be named, as the decision hasn’t been finalized, while an Italian finance ministry spokeswoman declined to comment.

Italian bonds fell on the news, with the yield on benchmark 10-year notes climbing 12 basis points to 2.66%. The euro extended its decline to fall 0.1% to $1.1192.

Italian Deputy Prime Minister Matteo Salvini on Monday indicated he’ll push back against EU demands when crafting his next budget. Salvini has the upper hand in the populist coalition after his party enjoyed a resounding victory in Sunday’s European parliamentary elections.

“I’m told a letter from the European Commission on the Italian economy is on its way,” Salvini said in Milan. “I think Italians gave me and the government a mandate to completely, calmly and constructively re-discuss the parameters that led to unprecedented job instability, unemployment and anxiety.”