Italy discussing reducing 2019 deficit target

Italy’s governing coalition is discussing reducing next year’s budget deficit target to as low as 2pc of gross domestic product to avoid a disciplinary procedure from Brussels, a government source said on Monday.

The goal in the draft budget is now 2.4pc of GDP, much higher than the 0.8pc 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 on Monday evening to consider a reduction of its deficit goal, a different government source said on Monday.

On Sunday, Italian Deputy Prime Minister Matteo Salvini, who is the League leader, hinted at the possibility of tweaking the deficit goal, saying “no one is stuck” to the 2.4pc target.

Italy could consider “fine tuning” its deficit goal to avoid market turbulence, a junior League minister told Il Messaggero in an interview on Monday.

“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.