UPDATE 1-EU's Katainen warns of contagion risk from Italy budget plans

European Commission Vice-President Jyrki Katainen urged Italy on Thursday to submit a draft budget that was in line with its previous commitments and warned of risks for Italy and other eurozone states.

"The situation is very fragile," he told reporters when asked about Italy's budgetary plans and initially negative market reactions.

He added that no one wanted financial instability that could hit Italy and other eurozone countries "that may suffer from contagion risks".

Katainen, who is responsible for jobs and growth, said the Commission was still trying to convince Italy to change its budget plans, which at the moment are likely to flout EU fiscal rules.

"Everybody has seen the situation in the markets, which is not positive," he said, referring to reactions to the Italian plans.

"Our interest is to get a result which is credible and try to convince the Italian government to take the responsibility, which lies in the hands of them," he added.

Italy and all other eurozone states have to submit their draft budgets for next year to Brussels by Oct. 15.

"We do hope we can get a good cooperation with the Italian government," Katainen said, adding: "It is not too late to maintain stability. It is not too late to make sure that growth can continue in Italy."