UPDATE 1-Italy avoids EU sanction threat over its debt, for now

The European Commission dropped its threat of disciplinary action against Italy on Wednesday after Rome took action to bring its growing debt into line with the bloc's fiscal rules. The EU executive said Italy is expected to be broadly compliant with the bloc's stability and growth pact this year. It said the government had also made additional efforts this year to partially offset the deterioration in the 2018 structural balance.

The EU executive is willing to examine all information from Italy over its public finances before making a final decision, European Economic Affairs Commissioner Pierre Moscovici told a news conference. "I am hopeful that Italy will deliver, it has delivered," Moscovici said.

The Commission also urged Italy to respect its commitment to preparing a 2020 budget in line with EU fiscal rules to avoid further uncertainty. This must be submitted to the Commission by Oct. 15. Rome has announced new six-month data showing the projected 2019 deficit will be some 7 billion euros less than targeted in April thanks to lower-than-expected spending and higher revenues.

It has also drawn up a decree to rein in the budget deficit in 2020, according to draft legislation seen by Reuters, which will likely allay the Commission's concerns.