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Italy’s New Government Will Challenge the E.U. at Its Heart

“Italians must understand that the future of Italy is in Europe and nowhere else, but there are rules to respect,” Mr. Le Maire said in an interview on Europe 1 radio.

“If the new government takes the risk of not meeting its commitments on the debt, the deficit, but also the cleanup of the banks, it is the entire financial stability of the eurozone which would be threatened,” he said.

Mujtaba Rahman, chief European analyst with the Eurasia Group, said that “even a fairly aggressive fiscal expansion will put Rome on a direct collision course with Brussels,” which had been predicting a more moderate Italian policy.

Italy’s New Government Will Challenge the E.U. at Its Heart
Italy’s New Government Will Challenge the E.U. at Its Heart

The crunch is likely to come in a new Italian budget next fall, Mr. Rahman said. The proposed expansion of spending is a direct challenge to “the whole philosophy of economic governance and rules governing the eurozone area,” he said.

The cumulative Italian debt is already about 130 percent of gross domestic product, more than twice what the eurozone is supposed to require, and probably too big to bail out if necessary.

The uncertainty around the Italian economy will also be a further major blow to the ambitions for eurozone stabilization and reform laid out by Mr. Macron, proposals that have already been sharply watered down by Germany.

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