The EU demands Italy do something about its buildup of debt. In response, Italy dismisses 'implausible' EU forecasts, says budget is sound.

"There are no grounds for questioning the soundness and the sustainability of our reforms," Prime Minister Giuseppe Conte said in a statement. "For this reason we consider any other type of scenario for Italy's public accounts to be absolutely implausible."

If Italy does not budge, the Commission could launch an "excessive deficit procedure" that could eventually result in fines, though these have never been levied on any country in the monetary union.

"The European Commission's forecasts for the Italian deficit are in sharp contrast to those of the Italian government and derive from an inaccurate and incomplete analysis (of the budget)," said Economy Minister Giovanni Tria.