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Italy approves 2019 budget, raising deficit to 2.4% of GDP

Italy's government on Oct. 15 approved an expansionary budget for 2019 which includes a basic income for the poor, offers a partial amnesty to settle tax disputes and tax cuts for the self employed, Prime Minister Giuseppe Conte and his top ministers said, Reuters reported.

Deputy Prime Minister Luigi Di Maio said the basic income to relieve poverty, which will cost some €10 billion, will be launched before the end of March 2019.

The budget will raise Italy's 2019's deficit to 2.4% of GDP, up from 1.8% this year. While the target is below the EU's 3% ceiling, it has unnerved financial markets and breached EU regulations that call for Italy and similarly highly indebted countries to reduce the deficit gradually toward zero.

The European Commission will now assess the fiscal framework and could dismiss it and ask Rome to draw up a new one. The Commission has said the budget will push up Italy’s public debt, which stood at 131% of GDP in 2017, the highest in the euro zone after Greece's.

The League and 5-Star, however, said they will not backtrack, saying spending is needed to boost growth and tackle rising poverty in the euro zone’s third largest but most sluggish economy.

Italy's Economy Minister Giovanni Tria described the 2.4% deficit target as "normal" and dismissed fears of contagion for the broader euro zone, Reuters reported.