Italian Prime Minister Giuseppe Conte will seek to end a standoff with the European Commission by presenting revised budget figures at a meeting later on Wednesday, a source in the premier's office said.
Conte is scheduled to meet Commission President Jean-Claude Juncker in Brussels after the EU executive rejected Rome's draft expansionary budget for 2019, which forecast the deficit rising to 2.4 per cent of gross domestic product next year from a projected 1.8 per cent in 2018.
"Italy's government has taken a decision on the budget; there is a proposal," the source said, adding that Conte would be going to Brussels "with good motives".
The source did not say what the new deficit figure would be and Conte's office said it was too early to release the number, but a Bloomberg report citing an anonymous official as saying it was 2 percent of GDP.
On Tuesday, a government source told Reuters that Italy's governing coalition partners, the right-wing League and the anti-establishment 5-Star Movement, were not willing to reduce the target to below 2.2 percent.
Italian government bond yields tumbled and the euro jumped on the prospect of Italy proposing a 2 percent of GDP deficit target.
Matteo Salvini, leader of the League and a deputy prime minister, said on Wednesday he was confident a solution could be found, adding that France was now in a similar budget position to Italy.
President Emmanuel Macron on Monday announced wage rises for the poorest workers and tax cuts for pensioners in response to weeks of public unrest - concessions that risk shunting the French 2019 deficit through the EU's 3 per cent ceiling.
"I trust in good sense, and I refuse to imagine that Macron's multi-billion-euro requests will be shunned while Italy's will be closely scrutinised," Salvini told journalists during an official visit to Israel.
But European Economic Commissioner Pierre Moscovici, speaking in Frankfurt, said Italy had violated EU budget criteria for years and that the French and Italian budget situations were not comparable.
Salvini, from Jerusalem, replied to Moscovici, saying, "I am beginning to get a little fed up with double standards."
La Repubblica daily reported on Wednesday that if the EU decided to discipline Italy over its budget, the League would consider pushing for a snap election in March.
Salvini strongly denied he was tempted by an early vote.
"The government will stay on for five years," he said.