ROME, Sept 27, 2018 (News Wires) - Italy's new government struggled to contain a fierce internal battle over fiscal policy on Thursday, hours before it was due to unveil its 2019 budget targets, sparking a sell-off of state bonds and reviving fears the economy minister could quit. Bond yields surged on fears the battle between ruling-party leaders and the fiscally conservative minister could lead to a delay in the much-anticipated release of the budget targets, due to be agreed by the cabinet in the evening. Prime Minister Giuseppe Conte's office has denied the cabinet meeting will be delayed. It is currently expected to start at 6 pm (1600 GMT) in Rome. Investors had interpreted an unsourced report in Corriere della Sera newspaper that the meeting would be pushed back a day or so as a sign Economy Minister Giovanni Tria may indeed resign despite repeated denials from his office, the latest of which came on Thursday. Before the cabinet meeting, Conte, Tria, the leaders of the two ruling groups - the anti-establishment 5-Star Movement and the right-wing League party - and other key ministers will meet to hammer out differences, 5-Star leader and Deputy Prime Minister Luigi Di Maio said. A government source said that meeting will start at 4 pm (1400 GMT). Five-Star and the League are pushing Tria, an academic not affiliated to either party, to ramp up the fiscal deficit to finance their promises of tax cuts and higher welfare spending. The cabinet is due to sign off on the new targets for economic growth, the deficit and public debt for 2018-2021, with most attention focused on the 2019 deficit goal. Tria has softened an initial insistence the deficit should not exceed 1.6 per cent of gross domestic product and is now willing to accept a ratio of around 1.9 per cent, government sources have said. That would compare with a current target of 1.6 per cent for this year, and would be sharply up from a 0.8 per cent goal pencilled in for 2019 by the previous center-left administration. Tria's Treasury department forecasts that a 2019 deficit above 1.9 per cent would put at risk the containment of Italy's debt, the highest in Europe after Greece, a source familiar with the matter said on Thursday.
