Brussels - The European Commission is in "intensive discussions" with Italy to see whether Rome will make "substantive adjustments" on trimming its budget, Commission Vice President Valdis Dombrovskis said.
He made his comments as eurozone finance ministers have meet to take up a package of proposals to reform the eurozone, as well as to review draft budgets of member states, including Italy.
That will be followed by a meeting of finance ministers from the entire European Union.
Dombrovskis, who noted he met with Italian Finance Minister Giovanni Tria, said "what we need to see is what concrete steps will be put forward."
"The tone of discussions has changed, though," he added.
Flouting EU fiscal rules
The European Commission rejected Italy's budget on November 21, a move that paves the way for an EU sanctions process - known as an excessive deficit procedure (EDP) - against Rome.
The matter went to EU member states, who have agreed with the commission's assessment, Dombrovskis said. Agreement among member states is needed for the commission to take the next steps on a process that would penalize Italy for flouting EU fiscal rules.
Brussels has been at loggerheads with Rome's populist government for months. Italy's leaders have largely stuck to a big-spending budget that they say will produce a deficit of 2.4 per cent in 2019.
Italy's public debt stands at more than 130 per cent of gross domestic product (GDP), the second-highest ratio in the eurozone and more than twice the 60 per cent allowed under EU rules.
Under a sanctions procedure, Italy would be subject to tighter EU monitoring of its finances. In case of continued non-compliance, it could in theory lead to hefty fines.
In recent days, however, several leaders of the government have indicated they might be willing to trim back the spending plan if needed.
Public opinion has also been pointing to a mood for compromise.
Sixty per cent of Italians want Rome to make concessions and soften its tone in the stand-off with the European Union over its spending plans, according to a survey conducted by the Ipsos research institute and published in the Corriere della Sera newspaper.