ROME — The European Union upped the ante in a standoff with Italy on Wednesday, taking another step toward punishing a government that has repeatedly flouted its fiscal rules by insisting on a heavy-spending budget that fails to bring down the country’s burdensome debt.

“With what the Italian government has put on the table, we see a risk of the country sleepwalking into instability,” said Valdis Dombrovskis, the European Commission vice president.

The country, which is led by populist and anti-establishment forces, was a case of “particularly serious noncompliance,” he added.

The European Commission, the bloc’s executive branch, will now turn its negative assessment of the budget over to eurozone countries. In two weeks, they could give the commission the green light to start an “excessive deficit procedure” against Italy, which could lead to steep fines.