Italy has made an offer to the European Commission to lower its deficit to 2.04 percent of GDP in 2019, Prime Minister Guiseppe Conte said on Wednesday, in a bid to avoid financial penalties from Brussels.
After meeting with European Commission President Jean-Claude Juncker, Conte said that additional resources had given Italy more financial wriggle room.
"Technical work allowed us to obtain a margin of negotiation because we have recovered some financial resources," said Conte.
The European Commission in October rejected the big-spending budget submitted for approval by the Italian coalition government of the far-right League and the anti-establishment Five Star Movement.
The budget includes a universal basic income of 780 euros for the least well-off to help them get back into the job market.
Conte said that the budget could be revised down from a proposed deficit of 2.4 percent to 2.04 percent, due to the "recovered" financial resources.
"These financial resources, we will now use in this negotiation with the commission. From a final balance of 2.4 percent, we could go down to 2.04 percent," Conte said.
The move comes after EU officials warned Italy that a proposed reduction in the public deficit to 2.2 percent would still be insufficient to avoid EU sanctions.
"The European Commission will now evaluate the proposals received this afternoon. Work will continue in the coming days," a commission spokesperson said.
If agreement is not reached, Italy could find itself the target of an EU excessive deficit procedure, which could ultimately lead to fines of up to 0.2 percent of the nation's GDP.
The offer of a budget deficit of 2.04 percent is considerably higher than the 0.8 percent the previous centre-right government had planned.
Brussels has said a high deficit would only add to Italy's already massive debt burden -- currently more than 130 percent of GDP -- and not deliver the growth promised after years of austerity measures.