Croatia's entry to the EU in July was celebrated as a mark of recovery from years of war during the bloody collapse of Yugoslavia, Reuters said.

But Croatia has quickly fallen into disagreement with its new peers over amendments to its extradition laws, made just a few days before it joined the group, which effectively ensured protection of veterans from Croatia's 1991-95 independence war from facing inquiries elsewhere in the EU.

Croatia's opposition HDZ party, which ruled the country in the 1990s and between 2004-2011, has accused the country's leftist-led government of tweaking EU rules to protect former Croatian intelligence chief Josip Perkovic.

Zagreb will also likely fall foul of EU budget rules this year thanks to a protracted recession.

The European Commission, which acts as the bloc's executive, is expected to invoke an article in Croatia's accession treaty that allows it to impose punitive measures if EU rules are broken, the so-called safeguard clause, Reuters said.

"Patience has run out. We will likely move to trigger the safeguard clause," one senior Commission official told Reuters, speaking on condition of anonymity. He said this would likely happen at the regular meeting of EU commissioners next week.

The Zagreb government pledged last month to apply European rules in full in an effort to avoid sanctions.

But the EU's top justice official, Viviane Reding, said in a letter to the country's Justice Minister Orsat Miljenic dated Sept 4 that Croatia's promise to change how the European Arrest Warrant will be applied next year was not enough.

Reuters cited Reding as saying that the lack of compliance could lead to delays in the country joining the bloc's Schengen passport-free travel zone, which Zagreb has said is a priority.

Two diplomats told Reuters specifically on this score, the Commission may decide to target funds given to Croatia to improve border controls to prepare for entry to the zone.