Tensions between Italy and EU ratcheting up

The EU is almost certain to reject Italy’s draft budget. In our view, it is most likely that a re-drafted budget would still fail to meet the EU’s rules, so Italy will probably be put into an Excessive Deficit Procedure. There are other possibilities though, including a collapse of Italy’s Government. But there is little reason to think that it would be replaced by one that is more intent on placating Brussels.