EU could impose sanctions on Rome if no budget deal: Moscovici

EU officials have said that if there is no change, the Commission is likely to react at its Nov. 21 meeting by issuing a critical report on the country's debt, the first step of a disciplinary procedure against Italy.

The Commission has in the past always waited for final data on public finances, available in April, before taking any disciplinary action on euro zone states.

But this time, officials said it could instead act on its own economic forecasts, due on Nov. 8, which are expected to show a far less optimistic scenario than the 1.5 percent GDP growth in 2019 predicted by the Italian government. Estimates of lower growth would translate into a higher debt and deficit.

As a precautionary measure, Brussels could ask Italy to transfer a non-interest bearing deposit of 0.2 percent of its GDP to the bloc's rescue fund, the European Stability Mechanism.

The Commission could also set a deadline, that could be as early as February, for Italy to take action to reduce its debt. Euro zone states would need to approve these moves.

Missing that deadline could trigger harsher sanctions, including a fine of up to 0.2 percent of GDP, the suspension of billions of euros in EU funds and closer fiscal monitoring by the European Commission and the European Central Bank, involving missions in Italy similar to those in bailed-out countries such as Greece. If it continued to fail to cooperate, Rome could face even stricter penalties under EU rules. They might include a fine of up to 0.5 percent of GDP, EU precautionary monitoring over Italy's plans to issue new debt and a reduction or suspension of multi-billion-euro loans from the European Investment Bank.