Italy Studying Lower Deficit Goal After EU Talks: Budget Update

(Bloomberg) -- Italian officials are studying scenarios for a lower 2019 budget deficit target after weeks of pressure from the European Union. Italian assets jumped.

Key Developments

• Five Star, the League both signal compromise on deficit target
• Prime Minister Conte to meet senior ministers at 7:30 p.m. in Rome
• Italian bonds jump

Salvini Says He’s Not Hung Up on Decimals (9:47 a.m.)

After weeks of holding the line, the key ministers have launched a media blitz this morning to explain their climb down to voters.

"We use common sense and substance -- we’re not getting stuck over 0.1 percent more or less," League Leader Matteo Salvini tells state broadcaster RAI radio. "If in Brussels they think they can hold the government and 60 million Italians hostages over a decimal place, we are very willing to remove that excuse."

Italian Assets Rise Across the Board (9:36 a.m.)

Italian bonds rallied with stocks and the euro strengthened. The yield on the nation’s two-year notes fell to 0.69 percent, the lowest level in two months. Intesa Sanpaolo SpA and UniCredit SpA shares jumped more than 5 percent as the FTSE MIB index of shares rose 2.8 percent, on course for the biggest rally since June. The euro added 0.3 percent to $1.1366.

Di Maio Confirms He Could Accept Lower Deficit (9:33 a.m.)

Deputy Premier Luigi Di Maio says government is committed to reform, but there can be dialogue with the EU on the deficit target.

“If as part of the negotiation, we need to reduce the forecast deficit slightly, that’s not important to us," Di Maio, leader of the anti-establishment Five Star Movement, says in radio interview. "The issue is not the conflict with the EU on a deficit of 2.4 percent, what’s important is that not even a single person is kept out of the core measures.”

Di Maio is pushing a citizen’s income to support poorer families and a lower retirement age as part of the budget.

League Official Signals New Target Could Be 2.2-2.3% (9:24 a.m.)

An official for the League, one of two populist parties in the governing coalition, said the administration is looking at a new target that is higher than the 2.1 percent of GDP reported in local media on Monday. The existing target, rejected by the European Commission, is 2.4 percent.

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