Italy, one of the world’s largest economies, already has a huge 132 percent debt to GDP ratio – second only to Greece on 180 percent.
Any moves to up its spending could lead to a downgrade by credit agencies, potentially triggering a financial crisis in the country and spreading around the EU.
Today, German Chancellor Angela Merkel appeared to rule out debt relief for Italy.
Speaking to the Frankfurter Allgemeine Sonntagszeitung, she claimed the principle of solidarity among members of the eurozone should not turn the single currency bloc into a debt-sharing union.
It comes after reports the anti-establishment 5-Star Movement and far-right Lega had planned to ask the European Central Bank to forgive €250 billion of Italian debt.
She said that while solidarity among members of the single currency bloc was important that principle “should not lead to a debt union.”
An Italian governing coalition of two parties generally seen as hostile to the euro took power on Friday.
That calmed markets that had been spooked by the possibility of a new election that might have effectively become a referendum on whether to leave the single currency.
Mrs Merkel told the paper: ”I will approach the new Italian government openly and work with it instead of speculating about its intentions.
The Chancellor congratulated Italian Prime Minister Giuseppe Conte in a phone call on Saturday and invited him for talks in Berlin, her office said.
Mr Conte, a little-known 53-year-old law professor, was sworn in on Friday.
It ended three months of political deadlock in the wake of inconclusive March 4 elections.
Merkel said she was willing to discuss with the new Italian government ways to boost employment rates among young people in Italy.