Suggested resolution:

Change in 8.8.3 [stmt.cont] paragraph 1 as follows:

A continue statement shall be enclosed by (8.1 [stmt.pre]) an iteration-statement or an expansion-statement. If the innermost enclosing such statement X is an iteration-statement (8.6 [stmt.iter]), the continue statement causes control to pass to the end of the statement or compound-statement of X. Otherwise, control passes to the end of the compound-statement of the current Si (8.7 [stmt.expand]).

There is no iteration-statement production that directly contains a compound-statement.