Italië krijgt tot 2007 om de begroting op orde te krijgen (en)

Brussels will advise Italy to settle its budget deficit by 2007, getting the country off the hook from eurozone pact sanctions for the time being, the Financial Times reveals.

The European Commissioner for monetary issues Joaquin Almunia i is to officially announce on Wednesday (29 June) that the country is in breach of the revised stability and growth pact and must fix its spending in two years, according to the paper.

The deadline should be long enough to keep Silvio Berlusconi's government from slashing the deficit this year.

But Rome is reported to have started work on a long-term budgetary plan aimed at cuttting spending, with the country set to breach the 3 percent eurozone limit on the public deficit both this and next year while its debt currently stands at 106 percent of GDP, compared to the 60 percent eurozone limit.

The latest figures suggest the country's economy continues to slide deeper into recession however, with industrial production slipping by 0.7 percent in the first half of the year and GDP declining on a monthly basis, writes the Financial Times.

Eurozone finance ministers meeting in July will hammer out the final details of the EU's response on the basis of the commission's recommendations.

The euro-bloc's strategy towards Rome will be closely watched, with observers keen to find out how European governments deal with fiscal discipline in practice following a loosening-up of the stability pact rules earlier ths year.