The European Union needs to be "sensible" in how it deals with the Italian budget crisis or the entire project could come to an end, one strategist told CNBC Friday morning.
The ongoing confrontation between the anti-establishment government in Italy and the European Commission has intensified over the few last weeks, with Rome insisting on increasing its spending next year, despite the EU's disapproval. The concern in Brussels is that the higher spending will increase Italy's debt pile, which is already the second largest in the euro zone.
"I think it is important the European Union give them some leeway and allow them to have some kind of deficit," Bryn Jones, head of fixed income at Rathbones, told CNBC on Friday morning.
"I think the Italians are actually in a very strong negotiation position. If they (the EU) don't want to jettison Italy from Europe, the whole project dies. They have to be quite sensible," Jones said on "Squawk Box Europe."
On Thursday, the Brussels-based institution sent a letter to the Italian finance minister, Giovanni Tria, warning him that the 2019 budget draft seemed to point to a "particularly serious non-compliance with the budgetary policy obligations laid down" in European rules.
The Italian government has until Monday to reply to the commission's latest letter. If from that response, the commission still believes that the budget is in serious non-compliance, it has two weeks to adopt an opinion and request a new draft budget within three weeks.