The diplomatic spat between the populist coalition government in Rome and the European Commission wasn’t resolved last year. Rather, parties on both sides opted to shelve it ahead of upcoming European Parliament elections in May.

However, recent economic data out of Italy is complicating matters.

The 2018 compromise was based on a 2 percent budget deficit for 2019, down from the originally proposed 2.4 percent. The plan had a little something for everyone. For Rome, its higher spending levels allowed space for the coalition government to make good on its campaign promises. For Brussels, the deal projected the optics of a populist government abiding by the bloc’s budgetary rules.

There was only one problem with the deal: it assumed a base level of 1 percent GDP growth to make the math work.

Just two months after the deal was reached, the European Commission slashed its estimate for Italian growth to just 0.2 percent in early February. Now the OECD has piled on more pessimism in a new special report released earlier this week. The organization predicts that the Italian economy will actually contract by 0.2 percent this year – down substantially from its previous estimate of 1.2 percent growth. It further adds that many of the new government’s policies – though positive in terms of easing poverty – are unlikely the boost growth over the short-term.

This wouldn’t be concerning if not for Italy’s already sky-high debt levels. Its 133 percent GDP-to-debt ratio is the second highest in Europe, behind only Greece. As such, putting sovereign debt on a downward trajectory remains a paramount concern of Brussels.