Italy — the eurozone’s third-largest economy and second-largest manufacturer — did finally emerge from a bruising triple-dip recession in 2015 when it recorded 0.7 per growth, the Financial Times reported. But hopes of a strong acceleration in the pace of the recovery in 2016 have already dimmed thanks primarily to international factors, such as emerging market weakness and the turmoil afflicting the global financial markets since the start of the year. That sparked a sharp drop in Italian equity prices, particularly those of the country's banks.

The Bank of Italy has long been considered a bastion of competence and stability in the eurozone’s third-largest economy — a counterweight to the often flighty economic stewardship of successive governments in Rome. But the sharp sell-off of Italian financial shares since the turn of the year — as investors fret over tough new EU “bail-in” rules and the large pile of non-performing loans on banks’ balance sheets — has turned up the heat on the central bank amid charges that it failed to protect the banking system.

Italy and the EU have reached a deal allowing Italian banks to sell their large portfolios of non-performing loans to private investors with a government guarantee, in an effort to ease market pressure on the financial sector in the eurozone’s third-largest economy, the Financial Times reported. The agreement, which follows months of tortuous negotiations between Rome and Brussels, is intended to clear one of the most worrying clouds hanging over the European financial system after the end of the continent’s long recession.

Matteo Renzi will celebrate a big investment by Apple in Naples today — just the kind of moment the youthful prime minister likes to project as a sign of Italy's renewal after years of stagnation and recession, the Financial Times reported. But that news — following a similar announcement by Cisco earlier this week — has been overshadowed by a deepening crisis of confidence in Italy's banks. They have suffered steep share price declines in recent days, triggered by what appears to have been a clumsy government restructuring of four medium-sized banks in November.

Perhaps the most important question hanging over the European economy this year is whether Italy’s recovery is for real, The Wall Street Journal reported. Statistics show that Italy last year emerged from its seven-year slump, growing by 0.8% in 2015 and is widely forecast to grow by 1.5% this year, and unemployment has fallen from a peak of 13% to 11.3%. Surveys show business and consumer confidence has rebounded—indeed, consumer confidence is at its highest levels in more than a decade.

Concerns about the €40bn of non-performing loans on the balance sheet of Banca Monte dei Paschi di Siena reduced the market capitalisation of Italy’s third-largest lender by assets to just €2.2bn as its shares hit a record low, the Financial Times reported. Led by Monte dei Paschi, shares in Italian banks fell sharply amid predictions of a tough year for the sector as an estimated €330bn in NPLs and low interest rates weigh on profitability.

Four Italian banks rescued last month from collapse will be sold by late spring, the chairman of the lenders said today, as Rome comes under pressure from Brussels to find buyers quickly, Reuters reported. "There is an obligation to sell (the banks) and significant pressure from the EU to do so very fast," Roberto Nicastro said.

Matteo Renzi, Italy’s centre-left prime minister, is facing a political backlash over the €3.6bn rescue of four small banks last month, after thousands of retail investors who lost money in the deal have mounted increasingly vocal protests, the Financial Times reported. The public opposition has led Italian officials to consider the rare step of paying a “social subsidy” to the most financially vulnerable junior bondholders who took a hit in the agreement to save Banca Etruria, Banca Marche, CariFerrara and CariChieti.

The Italian government will pocket over €4 billion ($4.4 billion) in proceeds from a tax amnesty it launched as part of a broad crack down on Italian money stashed abroad, The Wall Street Journal reported. The additional money will be a boon for the government, as it seeks to meet its budget targets amid a new slowdown in growth in the eurozone’s third-largest economy. However, doubts remain as to whether the amnesty will mark a real change in a country where tax evasion remains a scourge.

Banks in Italy fared better during the financial crisis than many of their peers, sparing Italian taxpayers the bail-outs their counterparts in other countries had to shoulder. But although they stuck to their cautious business models and avoided fuelling a big housing boom and bust, Italy’s protracted recession has enfeebled them, The Economist reported. It has caused bad loans to soar, which in turn has prevented them from supporting a still weak recovery with new lending.