In a double-whammy, Italian lawmakers are under pressure to pass a four-year, $55.6 billion austerity program and EU policymakers must finalize a second rescue plan for Greece while assuring financial markets the eurozone's debt crisis can be contained, MarketWatch.com reported.
While Italy's economic woes have been around for years, analysts say anything can trigger investor panic.
"There is now a very real risk that contagion will engulf Italy and Spain," James Nixon, a European economist at Societe Generale, said in a research note.
During a meeting Monday, eurozone finance ministers pledged to provide details "soon" of a plan to give more aid to Greece and prevent the debt crisis from spreading.
Ministers didn't specifically discuss Italy, where 10-year bond yields raced toward 6 percent, but ministers know Italy is at the heart of investors' concerns, Luxembourg Prime Minister Jean-Claude Juncker told reporters Monday.
Greece, Portugal and Ireland all received bailouts, but they represent a small portion of the eurozone economy. Economists said they fear Spain and Italy would be too big to rescue, MarketWatch.com said.
Italian Finance Minister Giulio Tremonti left Brussels Tuesday to return to Rome to help shepherd the austerity proposal through Parliament.
Because of recent market turmoil, the austerity plan could be approved within two weeks instead of by early August as initially expected, said Fabio Fois, an economist at Barclays Capital.
"Overall, we think that the acceleration of parliamentary approval is likely to be welcomed by markets," Fois told MarketWatch.com. "At the same time, however, we think that the government should also consider accelerating some of the fiscal measures scheduled for 2013 and 2014."