Europe finds itself at a troubling crossroads: while on one hand the official narrative emanating from Brussels and Berlin (and, of course, the ECB) is that there is no risk of contagion from Italy’s budget crisis in the European Union, on the other hand the euro zone is “not prepared enough to face a new economic crisis”, French Finance Minister Bruno Le Maire told daily Le Parisien on Sunday.

“We do not see any contagion in Europe. The European Commission has reached out to Italy, I hope Italy will seize this hand,” he said in an interview.

“But is the eurozone sufficiently armed to face a new economic or financial crisis? My answer is no. It is urgent to do what we have proposed to our partners in order to have a solid banking union and a euro zone investment budget.”

Le Maire’s remarks come just days after the European Commission rejected Italy’s draft 2019 budget earlier this week for breaking EU rules on public spending, and asked Rome to submit a new one within three weeks or face disciplinary action. And while Brussels officials said that Rome’s “unprecedented” standoff with Brussels seems certain to delay the reform process and probably dilute it for good, Italy has remained defiant and has repeatedly said it would not budge on its target deficit at 2.4% of GDP.

The standoff between Italy and the EU, and concerns about who will buy Italian debt after the ECB ends its QE at the end of the year, has sent Italian yields soaring to the highest level in nearly 5 years.

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