France, Italy and Spain at centre of EU budgetary surveillance

At the heart of the exercise are hundreds of pages of in-depth analysis on what each country is doing - ranging from budget cuts to fiscal and labour market reforms.

But what it will ultimately boil down to will be a few paragraphs for each one asking it to pursue or correct a this or that policy. A 28th report on the eurozone as a whole is also due to be published, including some recommendations still to be negotiated among the 27 commissioners on Wednesday.

Once adopted by EU leaders in June, all the country-specific and eurozone recommendations will become legally binding.

Twelve of the EU countries - Belgium, Bulgaria, Cyprus, Denmark, Finland, France, Italy, Hungary, Slovenia, Spain, Sweden and the UK - were singled out in February for being at risk of crises due to "macro-economic imbalances," such as property bubbles, public deficits or sluggish exports.

In a first-ever move, the EU commission might now recommend that some of these countries be further scrutinised on the macro-level, which could lead to sanctions further down the road if the country does not stick to its promises.

Germany - which, in theory should also have been reprimanded for economic surpluses that further aggravate the woes of the southern countries - is likely to see "a paragraph" on this on Wednesday, but the clause would likely have "no prominence" in its report, one EU official told this website.

A separate set of recommendations will look at excessive deficit targets in a group of 23 countries - all the EU states except Estonia, Finland, Luxembourg and Sweden.

No recommendations for sanctions are expected in this area, but the commission may recommend to close infringement procedures against some countries and start it against others.

The commission's wording on Spain is highly anticipated as the government struggles with a worse-than-expected recession, a higher deficit for 2011 than initially reported, a troubled banking sector and record-high unemployment.

Madrid hopes to get an extension of its 2013 deadline to bring its deficit from almost nine percent of GDP to three percent.

Italy, whose draft report was leaked to Reuters and the Financial Times, is expected to get praise for the reforms started by technocrat Prime Minister Mario Monti and some criticism for not doing enough against tax evasion.

The most important report for the credibility of the whole exercise - as one EU diplomat put it - will be France.

The newly elected Socialist President made campaign promises such as hiring 60,000 more teachers and lowering the retirement age to 60 - running against what the commission is prescribing to boost France's competitiveness and bring down its deficit from 5.2 percent in 2011 to three percent by next year.

"It is likely that France will be encouraged to continue some of the reforms done by Sarkozy and urged to start some others which were not done," one EU source told journalists in Brussels, highlighting labour market reforms as a must.

On top of the country analyses, the commission will also unveil its views on a report to be drafted by EU council chief Herman Van Rompuy on future steps to a fiscal union.

The paper is to be presented to EU leaders at the June summit and will be drafted with input from the EU commission, the European Central Bank and eurozone finance ministers.

Meanwhile, public support for more scrutiny from Brussels on national budgets is shrinking.

A survey ran by Pew Research Centre in seven EU countries and published Tuesday shows that 75 percent of British and Greek people oppose more EU authority over national budgets.

Only Italy is more favourable, with just 40 percent against. Half of the Poles and French are against heightened budget scrutiny by Brussels, 54 percent of Spaniards and 56 percent of Germans.

The survey also shows broad support for German Chancellor Angela Merkel's leadership among the surveyed countries (80% in Germany) - except for Greece, where only 14 percent gave her good marks.