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Italy May Offer Concessions to EU on Deficit Aims, Corriere Says

Italy to Bow to EU and Cut Deficit to 2% in 2021, Corriere Says

(Bloomberg) -- Italy’s populist government will offer some concessions to fend off European Union pressure about its public finances, committing to reduce its budget deficit targets in 2020 and 2021, while sticking to its guns for next year, Corriere della Sera newspaper reported.

The government will maintain its plan for a shortfall of 2.4 percent of gross domestic product for 2019, while reducing the targeted gap to 2.2 percent and 2 percent for the two successive years respectively, according to Corriere. The government had originally said it would aim for 2.4 percent for all three years.

Newspaper la Repubblica reported a similar change of position, a day after government officials said they were determined to follow through on their original plans. Deputy Premier Luigi Di Maio said the government will present its budget plan to Parliament on Wednesday, aiming to fund election pledges to cut taxes, create a minimum income for the poor and effectively lower the retirement age.

The euro snapped five days of losses, gaining as much as 0.4 percent to 1.1594 against the dollar after the report.

Italy already has the region’s biggest debt in absolute terms and its pledges to breach EU rules requiring deficit reduction have fueled fears of a renewed crisis and sent the country’s bond yields soaring. The spread between benchmark Italian and German bonds reached the highest in more than five years this week after the EU rebuffed Italy’s spending goals.

"There’s lots of political risks coming out of Italy," said Justin Tyler, Sydney-based director and portfolio manager at fixed-income house, Daintree Capital. "Anyone who believes a populist government is all of a sudden going to be particularly responsible in a fiscal sense, has a misguided view. You’re going to continue to see volatility in the euro.”

Italy May Offer Concessions to EU on Deficit Aims, Corriere Says

To contact the reporters on this story: Kevin Costelloe in Rome at kcostelloe@bloomberg.net;Andrew Davis in Hong Kong at abdavis@bloomberg.net

To contact the editors responsible for this story: Reinie Booysen at rbooysen@bloomberg.net, Andrew Davis, Nasreen Seria

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