The European Commission is likely to declare before the end of June that Italy and Portugal will run excessive budget deficits this year, while giving past serial budget offenders Germany and France the benefit of the doubt.
The treatment of excessive spending by euro zone members this year will be the first major test for the new-look Stability and Growth Pact that underpins the euro by curbing government borrowing.
EU finance ministers watered down the pact in March to help France and Germany avoid sanctions for breaking the spending limit for three years in a row and to give euro zone governments more leeway as they struggle with high unemployment and low tax revenues amid modest economic growth.
The commission expects Italy will have a deficit of 3.6 per cent this year, up from 3 per cent in 2004 for the first time since the budget spending limits were established.
The Italian shortfall is to widen to 4.6 per cent in 2006, but all the numbers may end up higher since the European statistics office has refused to validate Rome's accounts for 2004, raising the prospect the deficit may have been higher already then.
Portugal was likely to see a critical report on its budget deficit, seen at 4.9 per cent of GDP this year and 4.7 per cent in 2006.
But in the case of Germany, the euro zone's biggest economy which is to exceed the 3 per cent limit for the fourth year in a row with a 3.3 per cent gap, the commission will wait until after the summer to see how current deficit curbing measures are working and what budget plans Berlin has for 2006.
France, which is seen on the verge this year with a 3 per cent shortfall but rebounding to 3.4 per cent in 2006, will also get more time before steps would be taken.