The European Commission has told lawmakers in Italy that it must make revisions to its draft budget proposal.
Rancour between Rome and Brussels has grown in recent weeks after a draft Italian budget for 2019 proposed a deficit equal to 2.4 percent of the country's annual output. A previous Italian administration had promised a deficit goal of just 0.8 percent of GDP.
Italian bond yields rose in anticipation of the decision and stocks listed on the FTSE MIB in Milan also sold off. Bond yields move inversely to prices.
There are fears in Brussels that Italy's fiscal plan will derail the reduction of the country's debt pile — which is the second largest in the euro zone, totaling 2.3 trillion euros ($2.6 trillion). Within Europe, countries are expected to not run an annual deficit greater than 3 percent of gross domestic product (GDP). However, in Italy's case its debts have led to Brussels requesting that Rome work toward balancing its books.
Last week the European Commission sent a letter to the Italian finance minister, Giovanni Tria, warning him that the 2019 budget draft seemed to point to a "particularly serious non-compliance with the budgetary policy obligations laid down" in European rules.
In a response Monday, Tria replied that while he recognized the budget plan was not in line with Europe's Growth and Stability Pact rules, Rome planned to stick to the proposal.
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