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Italian PM upbeat on EU deal prospects ahead of budget votes

Reuters  |  ROME 

By and Giuseppe Fonte

(Reuters) - The begins voting this week on the government's contested 2019 budget, with optimistic that a deal can be agreed with the

says the expansionary draft budget - in which the deficit is forecast to rise to 2.4 percent of GDP in 2019 from 1.8 percent this year - is needed to prevent a chronically sluggish economy from tipping into another recession.

has rejected the budget, saying the plans will not lower Italy's large public debt as rules require, and has called on to make revisions to prevent a disciplinary procedure that could eventually lead to fines.

In recent days both sides have softened previously hardline rhetoric, reassuring financial markets and leading to a fall in Italy's borrowing costs. On Saturday Conte said a compromise was in everyone's interests.

"We make more progress at every meeting we have," he told reporters at the summit in Buenos Aires, where he and discussed the budget with top officials including

"We are looking at points that could be the basis for a "

Conte gave no details but said aspects discussed included ways some budget measures could be strengthened to improve Italy's faltering economic growth prospects.

This week, after discussion and votes in parliamentary commissions, the budget reaches the floor of the lower house, the Chamber of Deputies, where political sources say the government is likely to put it to a confidence motion.

This would hasten the passage of the bill by truncating debate on amendments and ensure discipline among sometimes fractious coalition partners, the anti-establishment and the right-wing League.

The government must resign if it loses a confidence vote, but such an outcome is not seen as a risk in the Chamber of Deputies, where the coalition of former rivals has an ample majority. The budget must be approved in both houses of parliament by the end of the year.

has denied the government is ready to make a significant reduction to the 2.4 percent deficit goal, but government and coalition sources have told it may cut it to as low as 2 percent to reach a deal with

The League's said on Sunday that money set aside for a measure to reduce the retirement age next year may be more than is actually needed.

"Whether we use these savings to lower the deficit or for other investments is a political decision the government will take with the Commission," he said in a radio interview.

Another prominent League lawmaker, Alberto Bagnai, said the Commission now appears less hostile to and that rioting in over the weekend is also likely encourage it to seek compromise rather than confrontation.

"If we see the discontent that there is in France, these are things that change the climate," he said in a television interview with state broadcaster

While Italy's deficit goal remains well inside the EU ceiling of 3 percent of GDP, Bagnai forecast that France's deficit will exceed 4 percent next year, partly because the government "will have to do something for these people".

(Editing by David Goodman)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Sun, December 02 2018. 23:42 IST