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Five Star set to back League's deficit-funded 'flat tax' plan after all

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Five Star Chief Luigi Di Maio

Five Star Chief Luigi Di Maio

Five Star Chief Luigi Di Maio

The two sides of Italy's fractious coalition are set to back a plan proposed by the right-wing League party to fund a so-called flat tax using a higher deficit.

The anti-establishment Five Star Movement, which initially opposed the idea, has given its blessing to the plan. That followed a threat from the leader of its coalition partner, Matteo Salvini of the League, to break up the government.

Salvini told lawmakers in a closed-door meeting he's ready to see the government fall if Five Star obstructs measures that are League priorities, according to party officials. Five Star chief Luigi Di Maio suffered a heavy defeat in last week's EU vote, seeing support for his party halved compared with its victory in last year's national election. Salvini's League came out on top in the European vote, giving it enhanced clout to get its policies approved. Prime Minister Giuseppe Conte said the government isn't yet working on a flat tax project.

Raising deficits could exacerbate tensions with the European Commission, which this week said it's ready to take the first step in a disciplinary process that would put Italy at risk of financial penalties. But Finance Minister Giovanni Tria said the government does not need a budget adjustment this year to address the concerns expressed by the EU.

Bloomberg

Sunday Indo Business