After weeks of publicly defying EU officials over its extravagant budget plans, Italy seems set to submit to Brussels’ demands for a more modest budget.
Deputy Prime Minister Luigi Di Maio said on Monday his government might be willing to reduce the deficit target to end the standoff.
"If, during the negotiating process, the deficit has to be reduced a bit, that's not a big deal," Mr Di Maio said. "The important thing is that not one person misses out on the (pledged) measures.”
Italy's draft budget contains expensive measures for introducing a guaranteed basic income of about €780 for poor families, and raising the retirement age.
While its stated aim is to “end poverty”, it would have ended up raising Italy’s deficit to 2.4 per cent of GDP, leading the European Commission to intervene, and telling Italy’s Government to revise the budget and tackle debt. Government sources quoted by Reuters suggested the deficit could now be lowered to nearly 2 per cent.
Italian Prime Minister Giuseppe Conte and European Commission President Jean-Claude Juncker had a weekend meeting in Brussels, which may have led to the apparent volte-face. Mr Conte told Italy’s ANSA news agency that it was more important to assess the wider economic impact of the proposed reforms.