According to an unsourced report in Italy’s la Republic newspaper on Saturday, Brussels is finally prepared to give the Italian Government some financial leeway in the escalating row.
In return, the EU wants a commitment from Italy to reduce its structural deficit, which is adjusted for economic growth fluctuations.
Italy’s populist coalition wants enough flexibility to introduce a flat tax and a citizen’s income in next year’s budget without running foul of EU budget restrictions.
The latest development comes after Italian Prime Minister Giuseppe Conte sent a stern warning to European figureheads, vowing to safeguard the country’s economic interests against ones from the bloc in order to tackle the huge debt it faces.
In July, Italy’s €2.1 trillion debt increased by 1.6 points, making it the third highest debt-ridden state after Belgium, which has shown a 2.9 point increase, and Greece, up 1.8 points, according to figures from Eurostat.
But the Government has still promised to increase benefit spending and tax cuts, plans that could cost as much as €120 billion in the first full year.
Speaking at a press conference in Rome on Friday before the summer recess, Mr Conte vowed his Government would be “very serious” in its demands to Brussels.
He told reporters: “You should bear in mind that so far in all our meetings with our European partners and the EU institutions, I never asked for any favours.
“We have already spoken about economic issues and we have already put forward some of the red lines in our economic plan.
“We will go to Brussels with our heads held high with a strong, reasonable and brave programme.
“A programme that will safeguard Italy’s interests, not theirs. On this, we will be very, very serious.”
Both Deputy Prime Minister Luigi Di Maio and Interior Minister Matteo Salvini have already warned the European Union that Italy would employ tough tactics to win concessions.
In an interview with Aljazeera, Mr Salvini warned that Italy would be prepared to veto any future decisions that will not be taken in the interests of its economic future.
He said: “We have put many issues on Brussels’ table to be discussed in the coming months.
“We aim at working in the next few weeks towards a mutual agreement.
“But if we are forced to veto decisions as our last resource, we will.
Mr Di Maio suggested that if the EU changed the way deficit is calculated, then the Government’s plans could be implemented without breaching EU budget restrictions.
He said: “We want to discuss these reforms with the European Union to obtain the margin for maneuver that will allow us to implement those measures.
“That means doing the same as we did on immigration. There shouldn’t be a clash with the EU, but a frank discussion.”
Earlier on Saturday, Italian Prime Minister Giuseppe Conte said his coalition Government will introduce a raft of structural reforms this autumn, reiterating that next year’s budget would be “serious rigorous and courageous”.
Among the planned measures are a simplification of rules surrounding the awarding of public works contracts, a new anti-corruption drive and move to accelerate the justice system.
Mr Conte also promised a reform of the country’s tax code, and the introduction of the ‘citizens wage’, which would ensure income of up to €780 per month for the poor.
Most of the measures could be laid out in detail during next year’s budget, and must be presented to the EU by mid-October.