According to EU rules, the current budget would then keep on rolling along annually.

"This means new challenges and problems cannot be solved," the German commissioner said.

He pointed to plans to boost the European Border and Coast Guard Agency's staff to 10,000 people, aimed to beef up external border control, which would fall through if the new budget was not agreed.

"It is in the interest of Italy and others that we are willing to strengthen Frontex," Oettinger said referring to the agency.

"The MFF [EU budget] is not in the interest of the European Commission ... but mainly in the interest of member states, regions, cities, industries, young people," Oettinger told an event on Tuesday evening in Brussels.

"So I think to block the negotiations is not fair, but it is mainly not smart, because it is damaging all member states, citizens, farmers, all researchers, and our common European competitiveness," he added.

Oettinger reiterated that Italy's previous comments - that it paid €20bn annually to the EU treasury - was "not correct".

The commissioner said Italy paid €15-17bn and that, taking into account what flowed back to the country in EU subsidies, Italy was a net contributor of just €2-3bn.

Italy's populist leaders have been threatening to hold back EU budget contributions if other member states did not take newly arrived migrants from Italy.

Fiscal rules

Oettinger, however, did not comment on Di Maio's other threat - that Italy would break the EU's 3 percent budget deficit rule in its next budget plan.

Those plans need to be submitted to the EU commission by mid-October.

"I don't want to speculate, such comments are not a basis for commission's analysis," Oettinger said.

On Tuesday, Italy's finance minister, Giovanni Tria, attempted to calm investors, saying that Italy was not planning to breach the EU's spending limit, contradicting Di Maio.

"The government's intentions throughout the summer also agreed upon by Di Maio, suggest the opposite," Tria told reporters on Tuesday during a visit to Beijing.

Mean while, Oettinger also reprehended Italy's populist politicians for having blamed the EU for the recent collapse of a bridge in Genoa which killed over 40 people and which raised questions about the state of the country's infrastructure.

Italy's interior minister Matteo Salvini claimed the EU budget constraints had prevented his country from spending on infrastructure safety.

The German commissioner said it was "unacceptable" to blame the EU for the bridge collapse, adding that Italy received "many millions" through different EU programs for infrastructure.

Speaking about the EU budget, Oettinger also said the new European Parliament after next spring's election must start financial negotiations immediately after the new assembly is voted in.

Weber candidature

He said he supported the German chairman of the European People's Party group in parliament, Manfred Weber, as a lead candidate for the centre-right EPP for the seat of the president of the next European Commission.

He described Weber as "competent, qualified, experienced, fair", but added that the lead candidate would not automatically become the commission president after the vote.

It also needed the agreement of a "qualified majority" of 28 EU countries to put the new woman or man in place.

The so-called spitzenkandidaten process is much disliked by member states, which say it has little legal footing in the EU treaties.

The process, which was first used four years ago, sets out that the parties need to put forward lead candidates for the commission presidency and that the party with the most votes in the EU elections should get the seat.