But Portugal will be taken off Europe's list of fiscal delinquents during the talks, which will also cover long-running negotiations aimed at getting Switzerland to comply with EU rules designed to clamp down on offshore tax fraud.

Ministers from the 12-nation eurozone on Monday evening -- following by a gathering of all 25 EU nations Tuesday -- are scheduled to discuss a European Commission proposal to issue Italy with a warning over its rising deficit.

The country risks breaching the EU Stability and Growth Pact's deficit limit -- 3.0 percent of gross domestic product -- this year, according to the EU executive.

But Portugal has got back in the commission's good books by striving hard to remedy its own finances and looks set to be officially taken off the list of deficit miscreants.

That list is headed by Germany and France, which have failed year after year to meet the 3.0 percent target. However, the rest of the EU has shown no stomach for a fight with the eurozone's two biggest economies.

Italy's Deputy Prime Minister Gianfranco Fini, citing the French and German precedents, has brushed aside the prospect of EU sanctions.

And Italian Finance Minister Giulio Tremonti will argue that his government is taking steps to avert a deficit breach and should therefore be spared an early warning, officials said.