UPDATE 1-Italy's 5-Star seeks "clarification" with League over tax amnesty row

5-Star has always opposed amnesties - a frequently used policy in Italy where people or companies can avoid being pursued for tax dodging by paying a fee.

The head of Italy's anti-establishment 5-Star Movement Luigi Di Maio said on Thursday that a dispute with the League over a tax amnesty needed to be sorted out because it was upsetting financial markets.

"We need a political clarification," Di Maio told reporters in Tuscany after the two ruling parties had their first major clash over the amnesty contained in the 2019 budget.

Di Maio said a steep rise in yields on Italian government bonds on Thursday was "because markets think this government is no longer united."

Di Maio, who is deputy prime minister, said on Wednesday the legislative text of the amnesty had been "manipulated" after his party had signed off on the measure in the cabinet, raising doubts about the stability of the coalition government.

5-Star has always opposed amnesties - a frequently used policy in Italy where people or companies can avoid being pursued tax dodging by paying a fee.

The right-wing League, on the other hand, favours amnesties, which bring money into the Treasury and are popular with its traditional voter-base of self-employed businessmen, a sector of the population in which tax evasion is common.

Di Maio said the "manipulated" text spelled out a far more wide-ranging amnesty than 5-Star had agreed to. He did not clarify who could have amended the document, but League Leader Matteo Salvini said there had been no last-minute tampering.

"The terms of the decree will not change and everyone will take responsibility for his actions," he said during a visit to the northern city of Bolzano.

Di Maio said he was confident the two parties would find "a point of compromise."

Asked by reporters in Brussels about a possible coalition rift, Prime Minister Giuseppe Conte - who is not from any political party - replied: "There is no division". He added he would work on the legislative text after returning to Rome on Friday.

(With inputs from agencies.)