EU finance ministers have delayed a decision over whether to issue Italy with an early warning over its budget deficit amid concern that surging oil prices could stunt Europe's fragile economic recovery.
Although the European Commission was steadfast that Italy should receive a formal reprimand, German Finance Minister Mr Hans Eichel warned Berlin could break the bloc's deficit rules in 2005 for the fourth year running.
The meeting of 25 EU finance ministers, the first to include representatives from the ten new members, opted to leave the decision over Italy's budget until July, sources said.
But three countries - Austria, Spain and Sweden - expressed doubts about the delay given that Italy's deficit is at risk of breaching European Union limits, sources said.
Germany's warning that it may once again exceed the deficit limit of 3 per cent of gross domestic product raised further questions over the region's commitment to the Stability and Growth Pact, designed to underpin the euro.
Germany and France persuaded their peers last November to suspend disciplinary action against them even though the euro zone's two biggest economies were expected to breach pact limits for the third year in a row.
The ministers' decision to delay taking action against Italy means Rome will be spared an embarrassing reprimand ahead of European and local elections in June.
Rome had been expected to get a sympathetic hearing after French Finance Minister Mr Nicholas Sarkozy said that