Italy angers EU in budget battle

(BRUSSELS) - European Commission head Jose Manuel Barroso sharply criticised Italy on Thursday for publishing a letter from the EU requesting clarifications on Rome's rule-breaking budget.

Hours before an EU summit, the Italian finance ministry released a letter from the EU's Economic Affairs Commissioner Jyrki Katainen, marked "strictly confidential", drawing the fury of Barroso.

The president of the EU's executive said the Commission was against this "unilateral" decision by the Italian government, preferring that negotiations on its budget take place behind closed doors.

Barroso, who steps down on October 31, said the Commission was "in consultations" with several countries over infringement of the rules and "it's better this happen in a context of trust".

Last week, member states which use the euro currency submitted their spending plans for next year to the Commission which won vast new powers of oversight from member states at the height of the eurozone debt crisis.

The Commission has so far refused to confirm or deny that France and Italy, along with Austria, Slovenia, Malta and Finland have all been notified that their submissions are problematic.

In Italy's case, the budget squarely misses structural reform commitments, even though it forecasts a deficit well within the EU's three percent of output ceiling.

The commission has until Wednesday to decide whether Rome and the other countries are in "serious" breach of the rules and the letter was the official warning that it may do so.

But admonishing France and Italy, the second and third-biggest eurozone economies, and formally demanding a change to their budget would be a huge political risk.

The fallout in France, with soaring unemployment and a stagnant economy, is especially a worry with the anti-EU far right becoming a dominant force.

Accordingly, the Commission has so far chosen discretion, a tactic Italy ruined by publishing the letter.

Asked whether France had received a similar letter, French President Francois Hollande said Paris officials were in constant dialogue with Brussels.

"We'll provide a certain number of information ... but growth remains our priority," Hollande said, arriving for an EU summit in Brussels.