October 29, 2018 / 3:19 PM / 21 days ago

Italy eyes ways to reduce deficit in 2019 budget: government source

ROME (Reuters) - If two pillars of the Italian government’s 2019 budget prove less costly than envisaged, the savings may be used to reduce the budget deficit, a government source said on Monday, a message that may be welcomed by the European Commission.

FILE PHOTO: Italian Economy Minister Giovanni Tria speaks at a joint news conference with European Economic Commissioner Pierre Moscovici in Rome, Italy, October 18, 2018. REUTERS/Max Rossi/File Photo

Italy is locked in a tussle with the EU executive, which last week rejected the populist government’s expansionary budget and asked Rome to submit a new one within three weeks.

The budget targets a deficit next year of 2.4 percent of gross domestic product, up from a targeted 1.8 percent this year, flouting an EU requirement that the deficit should fall steadily toward a balanced budget.

An early retirement option and a “citizens’ wage” income support scheme have been allocated around 17 billion euros ($19.36 billion) next year in the budget.

However, the details of these measures, as well as their timing, have not yet been fixed, and some of the funds may not be used if the reforms are not launched until later in year.

Any unused money may be dedicated to lowering the budget deficit below the official 2.4 percent target, the source said.

This marks a change of stance from the government’s previous position, which was that any unused funds from one of the two reforms would automatically be used to provide extra financing of the other one.

The leaders of the ruling parties, the anti-establishment 5-Star Movement and the right-wing League, have both insisted the budget will not be changed.

However, Economy Minister Giovanni Tria has admitted he wants a lower deficit target and he is considered more willing to seek a compromise with the Commission.

Parliament will begin discussing the budget on Wednesday, a source in the prime minister’s office said, and it must be approved by both houses by the end of the year.

Reporting by Giuseppe Fonte, writing by Gavin Jones; Editing by Crispian Balmer/Mark Heinrich

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