Mandatory Credit: Photo by ANGELO CARCONI/EPA-EFE/REX/Shutterstock (9936385i)
Italian Deputy Premier and Labour and Industry Minister, Luigi Di Maio, sits next to a large image of Italy's interior minister Matteo Salvini on a screen, as he attends the Raiuno Italian program 'Porta a porta' conducted by Italian journalist Bruno Vespa, in Rome, Italy, 17 October 2018.
Italian Deputy Premier, Luigi Di Maio on 'Porta a porta', Rome, Italy - 17 Oct 2018

The leaders of the two parties in Italy’s populist coalition have backed proposals by the country’s prime minister to cut planned spending for next year in a bid to avoid sanctions from Brussels.

Matteo Salvini, leader of the anti-migration League, and Luigi Di Maio, leader of the anti-establishment Five Star Movement, said after a meeting on Sunday that they had given their blessing to Giuseppe Conte’s revised budget plan.

There was “complete agreement between Conte, Salvini and Di Maio on the numbers and content of the proposal to send to Brussels”, a League spokeswoman said. The changes are expected to be submitted to Italy’s senate this week before being approved by parliament by the end of the year.

The changed budget, which is likely to result in a dilution of the coalition’s flagship policies, such as the Five Star’s so-called citizens’ income welfare payments and a reduction in the retirement age, marks a sharp reversal for Mr Salvini and Mr Di Maio, both who had previously pledged to stick to their plans no matter what.

Under Mr Conte’s proposal to the European Commission, Italy will pass a budget law by the end of the year that will produce a budget deficit of 2 per cent of gross domestic product in 2019, instead of the 2.4 per cent first put forward by the government.

But the offer has so far not satisfied the commission. Pierre Moscovici, EU economy commissioner, last week said it was a “step in the right direction, but we are not there yet”.

The commission had rejected Italy’s earlier budget plans, describing them as an “unprecedented” breach of bloc spending rules, and raised the prospect of levying fines on Rome if it failed to alter its course.

The League also denied a report by an Italian newspaper that Mr Conte had threatened to resign if his new budget plan was scuppered by intra-coalition fighting between the League and Five Star.

Following the meeting Mr Salvini told reporters: “We have found an agreement on further fiscal reductions that will probably be appreciated by the European Union,” according to Italy’s Ansa news agency.

The government is also discussing additional budget measures to raise taxes on luxury cars to fund incentives for electric and hybrid vehicles, as well as cuts to so-called “golden pensions” of state employees.

Mr Di Maio did not explain in detail in a blog post on the Five Star Movement website how his party’s main policies would remain intact after the changes to the budget, saying only that “there is very little time left to approve a budget law that contains measures that everyone said would be impossible to implement”.

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