Italy Stokes Brussels-Berlin Tensions With Anti-Austerity Proposals

Italian Prime Minister Matteo Renzi has launched another attack on the EU's economic policy, calling for increased spending as part of an anti-austerity agenda. The proposals, which present a challenge to the current status quo, are set to further strain tensions between Rome, Brussels and Berlin.

Amid fears from analysts that a "new storm on financial markets" could send Italy, Spain and Portugal into a fresh crisis, Renzi unveiled a new policy paper, calling on EU states to change tack to kick-start the sluggish EU economy.

Attacking the "shortcomings" of the current EU economic agenda, which critics have argued has stifled growth throughout the bloc, the Italian proposals call for an increase in government spending and a relaxation of EU budgetary rules to help drive economic activity.

"Europe is at a crossroads […] if we were to keep muddling through an uncertain recovery, progress in growth and job creation would fail to emerge and the euro area would remain exposed to shocks, undermining its sustainability," the paper said.

Analysts point out that such efforts would likely lead to increased government debt, something that has been strongly opposed by Germany in the past, and which is expected to be rejected by Berlin.

Eurobonds, Further Integration

Other proposals put forward by Renzi included a "mutualised funding mechanism" of EU border management, "which could entail issuance of common bonds."

Can #Renzi fix #Italy #economy? https://t.co/jgRA9Q48Zm pic.twitter.com/30dmEzF1Ow

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The idea of issuing Eurobonds was suggested during the Eurozone crisis, however German officials once again rejected such plans.

The plan also suggests member states should pool together resources already earmarked to tackle unemployment and use them to tackle inequality across the bloc, rather than in individual countries, arguing that it would further integrate states at a time when some countries are questioning their EU membership.

"Countries that are not direct beneficiaries will gain from a more stable and prosperous macroeconomic environment. It would be a further sign of the irreversibility of the Euro, with a positive impact on confidence."

This idea of further integration was expanded upon in the policy paper, with calls for a Eurozone and budget and Eurozone finance minister to help create a more even playing field across the single currency zone.

Renzi Ramps Up Criticism

The release of the economic proposals is another example of the combative stance Renzi has taken towards the EU establishment and Germany in recent times, with the PM clashing with Berlin over a number of economic, energy and EU related issues.

In December, Renzi stirred anger among EU circles when he said "Europe has to serve all 28 countries, not just one" in criticism aimed at the perceived German influence over the European Commission.

The latest proposals also come as European Commission President Jean-Claude Juncker heads to Rome for talks with Renzi and other government figures on Friday to try and smooth relations.