Early this morning, the European Commission announced that Italy is violating EU rules on debt reduction and that starting disciplinary steps would be warranted.

** This report will go for endorsement to the deputy euro zone finance ministers next week, and the Commission will then prepare a formal proposal to open the excessive deficit procedure, together with a plan on what Italy should do to bring it down, and in what time frame.

** Because the real issue flagged is about public debt, rather than the budgetary deficit, the time frame for any EU action plan for Italy is likely to be also long-term, covering as long as possibly six years.

** This Commission proposal, from what we understand, will be almost certain to be adopted by EU finance ministers at their meeting on July 8-9, and from then on Italy will be under the EU procedure.

Nevertheless, our indications continue to be, once again, not to expect any financial sanctions on Italy anytime soon.