EU rejects Italy's budget, raising stakes in dispute

BRUSSELS (AP) — The European Commission has rejected Italy's proposed budget for next year, arguing its deficit and spending are out of line to keep its debt in control.

It is the first time the EU executive rejects a member state's budget.

The EU's executive wants the Italian government to produce a new budget proposal after Italy dismissed the Commission's initial criticism and argued that the level of spending was needed to jumpstart its economy. 

The Commission is giving Italy three weeks to come up with a new proposal. Both sides have been fighting over its budget for weeks, but EU Commissioner Pierre Moscovici said over the weekend he wants to avoid a major conflict with the eurozone's third-biggest economy.