UPDATE 1-EU states agree disciplinary action over Italy debt justified- sources

Representatives of European Union governments agreed on Tuesday that an EU disciplinary procedure over Italy's growing debt was warranted, two European officials told Reuters, a move that could escalate a fight with Rome over its public finances.

The decision confirms the EU Commission's assessment that Italy is in breach of EU fiscal rules, one official said. After this first green light from EU states, the commission will have to decide whether to recommend the opening of the procedure, which could lead to financial sanctions for Rome and push up the cost of servicing Italy's debt.

EU governments' envoys also supported dialogue, with the aim of averting the procedure if Rome makes sufficient commitments to improve its public finances, the two officials said. But if talks with Rome failed to reach a compromise in the coming days, the EU executive could propose the opening of the procedure at a meeting on June 26, one official said.

The ultimate decision to launch the procedure would be made by EU finance ministers, probably at meetings on July 8-9.