Given that it is too-big-to-fail but also too-big-to-save, this could lead to a forced restructuring of its public debt. That would partially address its 'stock' problem of large and unsustainable debt but it would not resolve its 'flow' problem, a large current account deficit, lack of external competitiveness and a worsening plunge in gross domestic product and economic activity.
To resolve the latter, Italy may, like other periphery countries, need to exit the monetary union and go back to a national currency, thus triggering an effective break-up of the eurozone.
Even a restructuring of the debt – that will cause significant damage and losses to creditors in Italy and abroad – will not restore growth and competitiveness...if you cannot devalue, or grow, or deflate to a real depreciation, the only option left will end up being to give up on the euro and to go back to the lira and other national currencies. - in FT.com
Nouriel Roubini is an American economist. He teaches at New York University's Stern School of Business and is the chairman of Roubini Global Economics.