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Italy's Tria sees no obstacles to budget deal with EU

FILE PHOTO: Italian Economy Minister Giovanni Tria looks on before a joint news conference with Eurogroup President Mario Centeno at the Treasury ministry in Rome

ROME (Reuters) - Italy's economy minister said on Tuesday he was confident of reaching an agreement over its budget with the European Union, and that the draft's deficit targets would reflect a "more than prudent" fiscal policy.

Brussels is threatening to open a disciplinary action against Italy over its growing debt pile. The eurosceptic coalition government in Rome disputes the economic forecasts on which the European Commission is basing its projections.

Giovanni Tria, widely viewed as a moderate voice within the government, said he saw no obstacles to a deal with the EU.

The minister confirmed the government would cut its fiscal deficit target for this year to 2.1% from 2.4% of gross domestic product.

The coalition, led by the anti-establishment 5 Star Movement and the far-right League party, is due to formalise the new deficit targets on Wednesday.

"For a zero growth economy like Italy" a 2.1% deficit represented "a more than prudent fiscal policy", Tria said, according to the text of a speech to be delivered in Rome.

Under the EU's excessive deficit procedure, which the bloc's finance ministers would need to endorse at meetings on July 8-9, Italy would be forced to quickly tighten fiscal policy or face fines.

But minutes of an EU meeting this week showed the executive Commission could give Italy until January to make those policy changes, considered a relatively long deadline.

Political sources said the commission's main focus was on next year, when the government wants to avoid a scheduled increase in value added tax - from which 23 billion euros in additional revenues were anticipating - and introduce multi-billion euro tax cuts.

In the text of his speech, Tria said Italy aimed in future years to keep its deficit low and continue cutting its debt through reducing spending rather than raising taxes. "On this basis, we feel that Italy is substantially compliant with European fiscal rules."



(Reporting by Giselda Vagnoni; Editing by Andrew Heavens and John Stonestreet)