Finance Minister Giancarlo Giorgetti insisted his budget will respect European Union fiscal targets even while relieving families strained by the cost-of-living crisis.

With the cabinet in Rome set to scrutinize next year’s finance plan later on Tuesday, he told lawmakers in the Chamber of Deputies that premier Giorgia Meloni’s government will get the right balance between prudence and the need to help households.

“We confirm the course of our ship, even at a time like this when we see storm clouds on the horizon,” Giorgetti said, reiterating too that Italy will probably exit the EU’s special monitoring regime for large deficits next year.

The country’s 2027 fiscal plan, the last before general elections, is at a crucial juncture with its delivery to Brussels due by Thursday. Meloni and her coalition are focusing on that at a time when investor scrutiny on the bloated public finances of neighboring France has caused spillover throughout the region’s bond markets.

The budget will feature tax cuts and aid to families in part funded by faster-than-expected growth of 1% this year. The deficit will narrow to below the EU’s 3%-of-output limit, with debt falling in due course, according to government projections that point to Italy’s first outcome conforming with the bloc’s rules since the pandemic.

For Meloni, the aim is to pass a budget that will put her on track for reelection next year, overcoming tensions in her three-party coalition and a challenge from the resurgent National Future party led by former general Roberto Vannacci.

Among measures planned is a widening of an income-tax bracket which would cut levies to 33% for earnings between €50,001 ($55,934) and €60,000 euros.

Last year, the same measure was delivered for the category between €28,001 and €50,000, but a further widening of that bracket was deemed too costly. Italy’s two other income brackets are currently 23% on salaries up to €28,000 per year, and 43% for those above €50,001.

Lower levies for younger workers, tax breaks for small stores and for some types of rental contracts for homes, and various other aid to families and businesses may feature too, though Giorgetti didn’t go into details.

Meloni previously announced a sweeping reduction to fees paid for vehicle ownership which will affect about 70% of all cars and motorcycles.

To fund some of the budget, the government has asked the EU for extra leeway on energy and defense costs under the so-called national escape clause. The government plans to spend between €28 billion and €29 billion over two years, or 1.2% of gross domestic product.

“The commission has granted this fiscal space and it will be certainly used on investments to guarantee energy security,” Giorgetti said. “We however believe that it should also in some way, particularly in the initial phase of the crisis, be used to give support in a selective and temporary manner to families and businesses.”The challenge remains to fund all this while keeping the country’s accounts stable. To reassure markets, Meloni pared back as much as €8 billion from planned defense spending in the period.

The spread between Italian 10-year government bonds and comparable German ones, a measure of risk in the region, has widened to almost 110 basis points. While that’s the highest since March, it remains well below the over 200 basis points reached when Meloni first came to power.