MNI SOURCES: Lega Could Push Italy Deficit Up To 2.5% GDP

--Lega Sees Decision At Crunch 4 p.m. Meeting

--Compromise Seen Possible At 2%-2.5% GDP

By Silvia Marchetti

     ROME(MNI) - A decision on Italy's 2019 fiscal deficit will come at a crunch

meeting between Finance Minister Giovanni Tria and the ruling coalition's two

party chiefs, with a government source saying a compromise was possible in the

range of 2% -2.5% of GDP.

     Asked if Tria was sticking to his insistence that the deficit should not

exceed 1.6% of GDP, another source, in the minister's own ministry, told MNI

that "things had changed."

     A decision will be taken when Tria meets the Five Star Movement's Luigi Di

Maio and the far-right Lega's Matteo Salvini, together with Prime Minister

Giuseppe Conte, at 4 p.m. local time, although it will only be made public after

a cabinet meeting due four hours later, a source close to the Lega said.

     With the deadline for the government to hammer together a fiscal framework

looming at midnight Thursday, Di Maio and Salvini want spending to push closer

to the 3% limit under EU rules. A compromise is looking likely at somewhere

above 1.8% of gross domestic product, possibly in the 2%-2.5% range, the

government source told MNI.

     The budget package will include tax cuts promised by Lega, including

gradual adjustments to income and business levies, the source close to Lega told

MNI. Lega is also continuing to push for "crucial" changes to pension laws which

would allow workers to retire once the sum of their age and years of

contributions reaches 100, the source said.

     A government source with links to Lega had told MNI early in September that

the coalition government was ready to fully "stretch" the EU's 3% deficit-to-GDP

rule but without breaching it and would not ask the European Commission for any

extra fiscal leeway.

--MNI London Bureau; +44208-865-3829; email: Jason.Webb@marketnews.com

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