BRUSSELS (AP) — The European Commission on Tuesday rejected Italy's proposed budget — the first time it has ever done so with a member state — as it argues the populist government's spending plans for next year are out of line and would break promises to lower public debt.

The EU's executive wants the Italian government to produce a new budget proposal, ratcheting up a dispute with the country. Italy argues the big increase in spending is needed to jumpstart the economy but the EU and many regional leaders say it could jeopardize Europe's financial stability if Italy is unable to get its debts under control.

"Today for the first time the Commission is obliged to request a euro area country to revise its draft budgetary plan," said EU Vice-President Valdis Dombrovskis. "But we see no alternative."

Italy immediately replied that it would stick to its plans and that the EU Commission had no right to meddle.

"We won't subtract one single euro form the budget," Deputy Prime Minister Matteo Salvini told reporters while in Bucharest. "I personally am available to go even tomorrow to meet the President of the European Commission to explain how Italy's economy will grow thanks to this maneuver. But no one will take one euro from this budget."

Markets were quick to punish Italy over the dispute, with the government's cost of borrowing on international bond markets rising and the Milan stock market falling 1 percent.

The Commission is giving Italy three weeks to come up with a new proposal. Both sides have been fighting over the 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. 

Moscovici said the Commission does not question the aims of the Italian government, which says that years of austerity and spending cuts have left unemployment high and growth anemic.

But it says there are concerns about the budget's impact on Italy's people. Italy's public debt is worth over 130 percent of GDP, the second-highest level in the EU after Greece and more than double the EU limit of 60 percent.

Italy's budget aims to have a deficit of 2.4 percent of GDP next year, more than three times what it had previously promised. And the increased spending mean Italy would not reduce its debt as it had promised.

"Italy must continue its effort to lower its debt because it is the enemy of the economy," said Moscovici.