ITALY will not follow Greece in becoming the European Union’s next financial crisis and there is no need to “panic” over its high-spending plans, the eurozone’s bailout fund director said Tuesday.

Klaus Regling was speaking just before a European source said the European Commission, the EU’s executive arm, has rejected the budget proposed by Italy’s populist leaders.

Italy’s government says it will stick to a deficit of 2.4 percent of annual economic output next year, which would be triple the amount forecast by the previous government and approach the EU limit of 3 percent.

In turn, it would aggravate Italy’s already huge debt mountain, at some 130 percent of gross domestic product (GDP), way above the EU’s 60 percent ceiling and second only to Greece’s in Europe.

But Regling, the head of the European Stability Mechanism (ESM), the eurozone’s bailout program, said concerns were exaggerated.

“The [Italian] fiscal plans are not in compliance with the legal framework, but Italy is not the next Greece,” Regling told journalists in Luxembourg.

“One should not get into a panic,” the German said.

“Italy has not lost competitiveness, the fiscal deficit is not as high, and a large part of the Italian debt is financed internally,” he said.

“There is very, very limited risk for contagion to other countries,” he said, though Italy’s own banking system faced contagion, he added.

He said the “situation doesn’t remind me of the situation in Greece eight, nine or ten years ago,” but may resemble one in 2003 involving France and Germany.

“The European Commission eventually took France and Germany to court and it ruled that the European Commission was right,” he recalled.

The ESM is an international financial institution tasked with raising up to 700 billion euros (US$800 billion) on the financial markets to help eurozone countries that fall into financial trouble and save their private banks. (SD-Agencies)