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UPDATE 1-EU Commission says disciplinary procedure over Italy debt is warranted

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BRUSSELS, June 5 (Reuters) - The European Commission concluded on Wednesday that Italy is in breach of EU fiscal rules because of its growing debt, a situation that justifies the launch of a disciplinary procedure.

If European Union states back this assessment in the next two weeks, the EU executive could subsequently recommend to start the procedure, a move expected before a meeting of EU finance ministers in early July.

The Commission said Italy had made limited progress in addressing EU economic recommendations and backtracked on necessary structural reforms.

This "may negatively affect Italy's growth potential," the Commission said.

Italy's public debt rose from 131.4% of gross domestic product (GDP) in 2017 to 132.2% in 2018 and the Commission estimates that it will go up to 133.7% this year and to 135.2% in 2020, in breach of EU rules that say it should go down. (Reporting by Francesco Guarascio zfraguarascio and Jan Strupczewski; Editing by Robin Emmott, William Maclean)

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