Barroso clashes with Italy over published budget warning

The letter, sent Tuesday, says Italy's draft budget, submitted last week along with other national budgets for review in Brussels, "plans to breach" the debt and deficit rules underpinning the euro.

"According to our preliminary analysis Italy plans a significant deviation from the required adjustment path towards its medium-term budgetary objective," says the letter.

Signed by Jyrki Katainen, commissioner in charge of economic affairs, the letter asks why "Italy plans non-compliance with the (Stability and Growth Pact) in 2015" and requests a response by Friday so it can "take into account" Rome's views before it reaches a final decision.

This is only the second time the European Commission is scrutinising the planned budgets of euro countries to make sure they are in line with the rules - part of a system that was set up in the wake of financial crisis.

But the fact that both France - which is set to have its budget rejected - and Italy - which is sailing close to the wind - are both on the commission's radar has made the process highly sensitive.

Rome and Paris have so far taken a defiant stance, arguing that the euro rules need to be interpreted flexibly otherwise their economies will stagnate.

"France should be respected, it's a big country," said prime minister Manuel Valls.

Paris has been suggesting that its efforts to curb its spending have been under appreciated, even if it will not manage to bring the budget deficit to within the 3 percent demanded by EU rules until 2017.

Italian PM Matteo Renzi in parliament on Wednesday referred to "diktats from the outside".

The Italian media was Thursday full of headlines pitting Rome against Brussels.

Barroso said some of what he had read was "surreal" and that "most of it was completely false".

He also tried to depoliticise the issue by saying the commission is obliged to quickly write to governments if it thinks there is a problem with the budgets.

"We are involved in consultations. We continue in consultations with various governments but these are informal talks, in some cases these are quite technical discussions".

"The commission feels it is better if we discuss these issues in an atmosphere of mutual trust."

Barroso, who will finish as president at the end of next week, also noted that the incoming commission president was onboard with the letter.

"Mr Katainen sent out that letter, in due time, and that was with the full support of both myself and the new president of the commission Jean-Claude Juncker."

Barroso recalled that the member states had agreed to give these powers to the commission. But even as the rules were agreed, critics wondered whether they would be applied equally among large and small member states.

And there has been a general democracy question mark over the wider issue of the commission instructing national governments on how they spend their budgets - a sovereign issue normally decided with national parliaments.

The commission is due to complete its reviews of all budgets by the end of November, with France, Austria, Malta, Finland and Slovenia also in the firing line.