The Italian Treasury said the government has struck an informal deal with the European Union to avoid sanctions over the 2019 budget.

A spokeswoman for the Treasury, who asked not to be named, said the government has a technical agreement with EU officials which still needs to be ratified by commissioners when they meet Wednesday.

An official in Prime Minister Giuseppe Conte’s office said they expect the European Commission to take a positive view of the country’s latest budget proposals, based on Conte’s conversations with Economic Affairs Commissioner Pierre Moscovici and Commission Vice President Valdis Dombrovskis.

Italy cut its deficit target for next year to 2.04 per cent of GDP and shaved about 4 billion euros (US$4.6 billion) off its spending plans in a bid to persuade the EU not to start the sanctions procedure this week. The populist administration’s initial plan for a deficit of 2.4 per cent was rejected by officials in Brussels because they ruled it was in breach of the EU’s budget rules.

The deal will be officially announced Wednesday, the Italian Treasury official said. The EU is due to explain the result of its discussions around midday after the commissioners meet in Brussels.

Italy’s populist government has been locked in a tussle over its spending plans since the draft budget was produced in the fall.

During the final phase of the talks, Finance Minister Giovanni Tria has been trying to convince the EU’s budget inspectors that its 2019 spending plan will really deliver on its deficit projections. Analysis by the European Commission last month suggested that the deficit would actually be close to 3 per cent.

Once a deal is formally announced, the government will face a year-end deadline to get the bill through parliamentary approval.