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UPDATE 2-Italy's Salvini confident of budget accord with EU

* Deputy prime minister "doesn't want fight with EU"

Lega leader says growth is priority

* Salvini says he is open to alternatives to new debt paper

* Salvini, Di Maio and Conte due to meet later (Recasts with Salvini's comments)

By Francesca Piscioneri and Giselda Vagnoni

MILAN, June 10 (Reuters) - Italian Deputy Prime Minister Matteo Salvini expressed confidence that Rome would be able to reach an accord with the European Union over public finances ahead of a key coalition meeting later on Monday.

Salvini was due to meet his fellow deputy prime minister, Luigi Di Maio of the 5-Star Movement, and Prime Minister Giuseppe Conte, who has renewed his threat to resign if the two coalition leaders fail to reach a compromise in the budget tussle with Brussels.

Italy is at risk of an EU disciplinary procedure over its 2.3 trillion euro ($2.6 trillion) debt, which stands at more than 1.3 times its economic output - a ratio second only to Greece's within the euro zone.

Conte warned in a newspaper interview of possible market shocks and credit rating downgrades if the procedure went ahead.

But Salvini struck a reassuring note after his League party, which staked a claim to be Italy's strongest political force in a European election last month, was further boosted by second-round local votes on Sunday.

"The last thing we want to do is pick up a fight with Europe ... The only thing I'm not ready to compromise on is the need to reduce Italy's unemployment rate," Salvini told a news conference streamed live on Facebook.

"I believe it is also in Europe's interest to have an Italy that runs and not an Italy that strolls, so I'm convinced that among sensible people an accord can be found."

In a further attempt to dispel tension, Salvini said he would welcome any alternative to a controversial proposal to issue short-term debt to settle overdue payments to suppliers.


The proposal has rattled financial markets. European Central Bank President Mario Draghi and Italian Finance Minister Giovanni Tria have said such "mini-bills" would either amount to an illegal parallel currency or add to Rome's debt pile.

Coalition parties on Sunday pushed back against criticism of the so-called "mini-BOT" scheme, named after Italy's Treasury bills, highlighting growing tensions with the technocrats Tria and Conte.

"If there are other tools that are equally effective, that's fine," Salvini said.

He said he believed both Di Maio and Conte would agree that boosting anaemic growth had to be the government's priority:

"I think we're all in agreement that the agenda for the next few years is the battle to cut Italy's unemployment rate."

In a radio interview, Di Maio said he expected the trio to agree on a minimum salary, tax cuts and curbing privileges for politicians and policymakers.

Salvini said he was open to discussing a minimum wage but that firms first had to be put in a position to pay salaries, and that paying overdue state debts and cutting taxes were the only way to boost growth.

He added that he would only stay in power if he could work to boost Italy's "virtually zero" growth.

"This will be at the heart of our constructive dialogue with Europe," he said.

The Bank of Italy on Friday halved its forecast for economic growth this year to 0.3 percent, blaming global trade tensions as well as uncertainty at home holding back firms' investments.

($1 = 0.8849 euros) ( Writing by Valentina Za)