The line break is not terminating the itemize environment by itself. It
is the lack of indentation on the "bar bar" lines that terminates the
itemize environments in this case.
Thanks a lot! I have been fooled by Emacs. This situation was the result
on M-q on a previously single-line paragraph. I should have seen that.
I wonder why M-q didn't format it correctly. And now (after a restart), it does.