Rome-Brussels stand-off heightens concerns for European investors

Spat does little to calm nerves

Mounting tensions between the European Commission and Italy's fledgling government are sending the European Union down an unprecedented road with an unclear outcome, as investors grow increasingly worried about the longer-term implications for the bloc and European markets.

The battle began earlier this month when Italy's new government moved away from the EU's fiscal rules by wanting a budget deficit equal to 2.4% of GDP in 2019, instead of the 1.6% previously proposed by finance minister Giovanni Tria. Although the new level was under the EU's 3% deficit threshold, the country's high debt levels of 131% of GDP (the second largest among eurozone economies) mean Italy is required to cut spending. Italy's debt levels and budget plans had prompted concerns the country could have its sovereign debt downgraded to junk status. Italy's Budget: Will it deter...