Italy's governing coalition is discussing reducing next year's budget deficit target to as low as 2% of gross domestic product to avoid a disciplinary procedure from Brussels, a government source said today.
The goal in the draft budget is now 2.4% of GDP, much higher than the 0.8% set by the previous government, prompting European partners to threaten a formal rebuke and fine.
Italy's government, composed of the anti-establishment 5-Star Movement and the right-wing League, will meet this evening to consider a reduction of its deficit goal, a different government source has said.
Italian Deputy Prime Minister Matteo Salvini, who is the League leader, yesterday hinted at the possibility of tweaking the deficit goal, saying "no one is stuck" to the 2.4% target.
Italy could consider "fine tuning" its deficit goal to avoid market turbulence, a junior League minister told Il Messaggero newspaper in an interview today.
"In order to save the budget and avoid an increase in market turbulence a small fine-tuning (of the deficit target) could be considered," Armando Siri, a Transport Ministry undersecretary, told the paper.
Italian government bond yields fell to two-month lows in early trade on the prospect that the government would revise its budget plan.