The Italian spread for 10-year bonds pushed beyond the 3% psychological ceiling on Tuesday, as compared to the German benchmark (Bund).

The spread reached 318 points and Italy is paying an overall yield of 3.58%. This is the highest level paid by Italy since 2013.

Despite the heated rhetoric, there are reports that Italy’s coalition government is bracing for a policy accommodation to appease markets, if not Brussels.

According to Il Messangero edition on Tuesday, a new 2019 budget is being drafted that entails two important policy compromises. First, the Italian government is ready to water down the universality of Italy’s minimum guaranteed basic income and, secondly, the rollback of pension reforms that would allow Italians to retire earlier.

If proven accurate, this constitutes a pollical retreat for the Italian government, which affirmed its determination to stand its ground on Monday and Wednesday.

Italy’s 2019 budget aims for a 2,4% of GDP deficit, that is, treble the level agreed between the European Commission and the previous Italian government. The Italian government acknowledges that the deficit is not in line with the EU’s Stability and Growth Pact.

Consequently, Rome does not have a “Plan B” in the sense of planning an exit from the Eurozone. That was confirmed in a statement to Bloomberg by prime minister Giuseppe Conte on Tuesday.

Creating negotiating space, Conte said that 2,4% was Italy’s “ceiling,” indicating there was room for improvement on the target.

Asked explicitly if Italy would be willing to substantially decrease the target, Conte said that this would be “difficult.” However, Conte suggested that Italy could agree to a spending review, accommodating policy as required if budget targets are not being met. “We are ready to make spending cuts in 2019,” the Italian prime minister said.

The Italian government insists that the only way to address the Italy’s high debt-to-GDP ratio – currently standing at 132% — is to boost growth and, therefore, increase public spending.