Senior ministers in Italy's government were expected to meet on Friday to discuss next year's budget, two sources said, amid divisions in the cabinet over spending plans.

Ahead of the meeting, scheduled for 0900 GMT according to the sources, deputy Prime Minister Matteo Salvini said the budget would include tax cuts and pensions reform.

Both moves would likely increase Italy's large public debt.

Salvini's remarks came as short-dated Italian government bonds were selling off for a second day in a row on continued speculation over the government's budget plans.

His comments confirmed plans by the governing coalition - the anti-establishment 5-Star Movement and the far-right League - to pursue tax cuts and higher spending.

Investors fear Economy Minister Giovanni Tria could be sidelined or even forced to resign over the budget.

Tria, an economy professor, has repeatedly said he planned to reduce the country's huge debt and wanted to coordinate fiscal moves with the European Commission, which monitors how European Union member states comply with EU fiscal rules.