MORNING BID EUROPE-Not satisfied: ex-communist world speaks

* A look at the day ahead from European Economics and Politics Editor Mark John and Nigel Stephenson, specialist editor, EMEA markets. The views expressed are their own.

LONDON, Dec 14 (Reuters) - Sobering conclusions from the colossal report by the European Bank for Reconstruction and Development (EBRD) and the World Bank on happiness in Europe's former communist countries: A quarter of a century after the collapse of the Soviet Union, life satisfaction remains stubbornly low and enthusiasm for democracy and open market economics is wavering. Moreover, just over half of respondents from the 51,000 households interviewed said a return to a more authoritarian system would be a plus in some circumstances. Cue Poland, where the European Commission is due today to issue a statement on its record on observing the rule of law since the Law and Justice (PiS) party came to power a year ago. The EU already has a procedure underway against Warsaw for undermining the judiciary, breaking the Polish constitution and curtailing civic and human rights -- the type of breaches which prompted thousands to come out on the streets across the country yesterday in protest.

Italian Prime Minister Paolo Gentiloni won an initial vote of confidence in the lower house of parliament last night but faces a tougher test in the Senate upper house later today where his majority is likely to be much smaller. Most observers expect him to scrape through but are now focusing on the prospect of elections in the first half of 2017, a year ahead of schedule. For now, financial markets are taking things largely in their stride.

In Spain, Mariano Rajoy may have hung onto power, but resistance is building to the flagship labour reform of his previous administration which cheapened the cost of hiring and firing. Opposition parties yesterday passed a non-binding motion urging him to reverse a labour reform and could now try to table a binding law proposal with labour market changes. Despite not having a majority in parliament, Rajoy's government still has the power to veto such bills -- if it can argue they affect the budget.

MARKETS AT 0755 GMT

It's time for what now seems like the annual Fed interest rate hike. There's certainly a sense of déjà vu. But this time does seem a lot different: the inflation trajectory, the underlying economy, the politics and policy and the direction of energy prices and bank stocks. There seems little reason not to confirm market expectations for a quarter-point rise, with two to three rises next year already priced in. But many people, including the Fed itself, were talking of that a year ago too, before an early-year market storm over oil and China, renewed anxiety over the European banking system, news about Brexit and the U.S. election blew Yellen and Co off course. Could 2017 pack as much turbulence? A different sort of turbulence perhaps, one emanating from rising bond yields rather than negative interest rates.

As the FOMC decision at 1900 GMT and Yellen's following press conference is awaited, world markets have stalled. Brent crude, the dollar and 10-year Treasury yields have slipped back a touch overnight, with oil homing in on $55 and euro/dollar about $1.0650. Asia bourses were steady to mixed earlier, after another record high for Wall St stock indices. Curiously the latest push higher this week has come in tandem with a rising Vix from recent lows. That may have more to do with the year-end period the 30-day contracts cover, but worth watching for concerns that either these record levels are unsustainable or that you can get as much volatility on the upside. European stock futures are set to dial back a bit after strong gains Tuesday on the back of surging Italian bank stocks, where details of Unicredit (EUREX: DE000A163206.EX - news) 's cash call plans sent its share price up almost 20 percent at one point and some semblance of political stability in Rome saw Italian bond spreads narrow.

Upcoming events/data/themes for market reports on Wednesday:

- SKorea Nov trade data, jobless

- Japan Q4 Tankan, Oct (HKSE: 3366-OL.HK - news) industry output

- Europe corp events: Inditex (Amsterdam: IT6.AS - news) , Metro (Dusseldorf: 62M.DU - news) , Dixons Carphone (Frankfurt: CWB.F - news) (Brexit Watch), John Wood (Frankfurt: JWG1.F - news) , Micro Focus

- Swiss Dec ZEW

- France Oct industrial output, final Nov inflation

- Riksbank executive board meeting; government bond auction

- UK Nov Jobless, Oct earnings

- UK auctions 10-year gilts

- EZ Oct industrial production

- Iceland, Croatia, Uganda interest rate decisions

- European Commission statement on rule of law and democracy in Poland

- SAfrica Nov inflation

- Hungary industrial output

- US Nov industrial output, retail sales, PPI

- UK Brexit Minister Davis quizzed by parliamentary committee

- FOMC decision and press conference (Editing by Sonya Hepinstall)