Italy has been one of the European Union’s financial weak links for years thanks to bad loans racking up enormous debts.
The state’s GDP is barely higher than when the single currency was formed in 2000 and its working age unemployment rate currently stands at 12 per cent.
And while the economy grew 0.9 per cent last year, the International Monetary Fund warned it will not return to pre-crisis levels for another decade.
Now Giuseppe Vegas, the president of stock market regulator CONSOB, claimed Italy must prepare itself for the tightening of the European Central Bank’s monetary policy.
More than two years ago, the ECB carried out a comprehensive assessment of the euro area’s 130 largest banking groups – 15 of which are Italian.
But nine failed the exam, including the country’s oldest bank Monte dei Paschi di Siena (MPS), and a further four were still being undercapitalised.
And the ECB was forced to act, forcing banks to find fresh capital amid other similar initiatives designed to boost the failing economy.
In his annual speech to the financial market, Mr Vegas said that ‘quantitative easing’ of the ECB “has reduced the pressure on countries, such as ours, who more than others needed to recover ground on competitiveness, stability and convergence”.
But the CONSOB chief went on to say “this hasn’t worked” – adding that Italy had already suffered a 30 per cent drop in competitiveness compared to Germany during the last two decades.
He said: “Inflation is progressively moving close to the 2 per cent target, while the US is already undergoing monetary tightening.”
And he insisted Italy will “have to prepare to face a new situation, in which it will no longer be possible to count on the external support of monetary leverage”.
But Mr Vegas also warned the country could now gear up to take itself out of the eurozone if the ECB tightens its purse strings.
And he claimed that an “Italexit would be a shock for the entire eurozone, and it would endanger its survival”.
The Commission’s number one pointed out that any plans to quit the Brussels bloc would “jeopardise stability, the sound functioning of the financial system and the safeguarding of the market, objectives which fall within the institutional CONSOB”.
He added: “The announcement of a return to a national currency would cause institutional investors an immediate outflow of capital that would seriously jeopardise Italy’s ability to refinance the world’s third public debt.”
In March, the chief economist of the European Central Bank warned Italy and France that their economic problems would not be solved by breaking up the single currency.
Peter Praet said: “What I do worry about is the populist narrative that things were better before the euro.
“This is a deception. We arrived at monetary union after disastrous experiences with floating exchange rates and some unsuccessful attempts of orderly floating.
“The devaluations that populists claim is a free lunch and allows to regain competitiveness by miracle proved extremely expensive.”