A Fistful of Euros gave the heads-up on this story a few days ago. Now it's official. From EurActiv.com:
The Commission has recommended giving Italy until 2007 to bring its deficit below the 3% limit. The excessive deficit procedure is unenforceable in practice, says an economist from a Brussels-based think tank...
In a move expected to be backed by EU finance ministers on 12 July, the Commission has given Italy until 2007 to get its financial house in order. Although regulation 1467/97 specifies that an excessive deficit should be corrected with a year following its identification, the Commission has taken the view that Italy is a special case due to its cyclical economic weakness and the size of the adjustment it needs to make.
Meanwhile, The Capital Spectator asks "Does the Dollar Rally Have Legs?" TCS didn't have this story in hand, but I tend to think it is highly relevant to the question.