Eurozone heads meet amid fears of Italy bail-out

Fears are growing that Italy may be forced to accept a bail-out, after divisions in the country's political elite prompted stocks to fall sharply on Friday. The decline included an eight per cent drop in shares in Italy's largest bank, Unicredit Spa, and the market continued to fall this morning.

Confidence in Italy's banks has been falling in anticipation of the results of "stress tests" which will be released later this week. The spread of the Italian 10-year government bond yield over benchmark German Bunds also hit a new high late last week, pushing Italian borrowing costs to record levels.

Added to that uncertainty is an apparent falling out between prime minister Silvio Berlusconi and his finance minister Giulio Tremonti.

Eurozone officials are today meeting in Brussels to "coordinate their positions" on Greece. Observers say that they will also be discussing the threat of contagion to Italy. "The EU is definitely worried," said a Daily Telegraph source.

Italy, Europe's third largest economy, has a high ratio of sovereign debt to overall economy which is second only to that of Greece. Analysts say that a bail-out to Italy would dwarf previous arrangements with Greece, Ireland and Portugal.

Read a full report at the Daily Telegraph. ·