Italian Prime Minister Mario Monti expressed serious concern on Tuesday over a possible default by Sicily, an autonomous region long criticized for its wasteful public administration and bloated government payroll, Reuters reported. Monti said in a statement there were "grave concerns" that the southern island could default and he said he had written to the governor Raffaele Lombardo seeking confirmation that he would resign by the end of the month.

The latest Italian bond downgrade had only modest impact on the market Friday but highlighted the risk of losing access to capital markets for the euro zone's third-largest economy, The Wall Street Journal reported. Government officials here insisted that Moody's Investors Service's two-notch downgrade early Friday was unjustified—a common refrain in Rome—and insisted they would convince investors that recent tough fiscal and economic measures would go on and bear fruit. The move was "completely unjustified and misleading," said Industry Minister Corrado Passera.

Italy said on Tuesday it may want to tap euro zone aid to ease its borrowing costs as finance ministers struggled to convince markets they are getting a grip on the bloc's debt crisis, which a top European Central Banker said could escalate, Reuters reported. Prime Minister Mario Monti, who is under intense market pressure to shape up his economy and avoid being drawn into the centre of the debt crisis, said Italy could be interested in tapping the euro zone's rescue fund for bond support.

Euro zone experts discussed a Finnish proposal for Spain and Italy to issue covered bonds to make their debt more attractive and to allow the euro zone's permanent bailout fund to bid at primary auctions of the two countries, officials said on Thursday, Reuters reported. The aim of the Eurogroup Working Group of deputy finance ministers and treasury officials is to find a way to lower financing costs for the two sovereigns that European Union leaders meeting in Brussels could discuss later.

Banca Monte dei Paschi di Siena SpA, the world’s oldest bank, will seek 3.4 billion euros ($4.3 billion) of government money to plug a capital gap uncovered by European regulators, Bloomberg Businessweek reported. “There were no alternatives,” Chief Executive Office Fabrizio Viola said Wednesday at a presentation in Siena. The bank expects to pay a higher interest rate on these securities than the 8.5 percent annual coupon for 2009 aid, Viola said. The government hasn’t set the bond’s terms yet.

Two holding companies of the embattled Ligresti family, which controls Italy's second-biggest insurer Fondiaria-SAI, were declared bankrupt on Thursday, muddying the waters of a plan by insurer Unipol to save its troubled peer, Reuters reported. A Milan court declared bankruptcy on the Sinergia and Imco holdings of the Ligrestis, rejecting a request from the firms' lawyers for more time to draw up a proper debt restructuring.

Raising the stakes in Europe's debt crisis, Austria's finance minister said Italy may need a financial rescue because of its high borrowing costs, drawing a sharp denial on Tuesday from the Italian prime minister, Reuters reported. Maria Fekter's assessment of the euro zone's third largest economy stoked investors' fears that Europe is far from ending 2-1/2 years of turmoil - a feeling reinforced by Dutch Finance Minister Jan Kees de Jager, who said the euro zone was "still far from stable".

As Spain became the fourth euro zone country to accept an international bailout, investors turned their nervous gaze Monday to Italy, selling Italian stocks and bonds on worries that Rome could be the next victim of Europe’s financial infection, the International Herald Tribune reported. Italian officials are now privately expressing concern that even a €100 billion, or $125 billion, bailout for Spanish banks may not stop the troubles from spreading.

Italian prosecutors have widened a probe into the family group that controls troubled insurer Fondiaria-SAI, sources said on Tuesday, in a move that could complicate plans to rescue Fondiaria through a merger with peer Unipol, Reuters reported. Milan prosecutor Luigi Orsi launched a probe last year into alleged market irregularities carried out by Salvatore Ligresti, the patriarch of the family controlling Fondiaria.

Lucchini group has sold its key foundry, Bari Fonderie Meridionali (BFM), to the Czech DT - Vyhybkarna a Strojirna AS, as part of Lucchini's debt restructuring plan, the Italian steelmaker said on Tuesday, Reuters reported. Lucchini, owned by Russia's Severstal and Severstal's owner Alexei Mordashov, reached a deal with shareholders and creditor banks in December, to restructure Lucchini's 720 million euro ($960.41 million) debt pile. The debt agreement is widely seen as paving the way for a potential sale of the debt-burdened Italian steelmaker to a third party.