MILAN (Reuters) – The European Commission will launch disciplinary procedures against Italy on Wednesday with a letter stating that Rome’s fiscal policies lack prudence and could expose the nation to a shock loss of market confidence, newspaper La Repubblica said.

The newspaper quoted from what it said was a draft of a letter to be sent to the Italian government, which has embarked on major new welfare initiatives in an effort to boost the euro zone’s third-largest economy.

The daily also said the commission would ask Rome to make budget cuts of around 3-4 billion euros to avoid EU sanctions, though it did not source this to the draft letter.

(Reporting by Mark Bendeich; Editing by Claudia Cristoferi)