Italy cuts deficit target for 2019 to 2.04% to avoid EU sanctions

Bonds rally after Rome bows to pressure but EU says more needs to be done

The Italian government will be forced to cut "a few billion" across two of its flagship policies to meet the lower deficit target it has proposed to the European commission.

Italian bonds rallied after the government bowed to pressure to reduce its deficit target for 2019 to stave off EU sanctions. The country's prime minister, Giuseppe Conte, proposed cutting the target from 2.4% to 2.04%.

Related: Italy's budget drama - all you need to know