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Italy's 5-Star to keep budget deficit at 1.5 percent, says leader Di Maio

MILAN (Reuters) - The 5-Star Movement, which emerged as Italy’s biggest party after last month’s vote, will propose an economic plan which will keep the budget deficit near the level forecast for this year by the outgoing center-left government, its leader said.

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The anti-establishment party won over 32 percent of the vote in the March 4 ballot, but the election produced a hung parliament, so it needs to find allies to be able to form a government.

During its campaign, the 5-Star pledged to raise the budget deficit in order to fund welfare spending and tax cuts, but has toned down its comments since the vote. The change in stance was widely seen as a bid to show the European Union and financial markets it plans to be responsible with public finances.

In an interview with La Repubblica newspaper on Saturday, 5-Star leader Luigi Di Maio said his economic plan would “keep the budget deficit at 1.5 percent”.

He did not specify which year his forecast was referring to.

The outgoing center-left Democratic Party (PD) has forecast a 2018 budget deficit at 1.6 percent of gross domestic product, down from 2.3 percent last year.

Both 5-Star and the far-right League - the leading party in a conservative coalition that won most parliamentary seats in the March election - say they have the right to govern.

They are each preparing policy proposals to be presented this month as alternatives to the outgoing government’s multi-year economic plan, but whereas the League has maintained strong eurosceptic rhetoric, 5-Star has taken more moderate positions.

The plan it is preparing may be seen as an attempt to persuade the PD to back a 5-Star government as a junior partner rather than go into opposition as it has so far pledged to do.

In the interview, called Di Maio on the PD to put bitter rivalries aside in a bid to help form a government.

“We have been asked to give the country a government, but everyone has a duty to help solve the people’s problems and to show a sense of responsibility,” he said.

Talks to try to break the stalemate have so far failed to make progress and a fresh round of consultations is scheduled for next week.

Di Maio has called for a German-style governing contract with either the League or the PD, a proposal so far rejected by both parties.

The PD says it wants to go into opposition, while League leader Matteo Salvini has refused to break with his coalition ally, former Prime Minister Silvio Berlusconi, which is a condition posed by Di Maio.

Reporting by Agnieszka Flak; Editing by Ros Russell