The Milan stock exchange suffered big losses in early trading on Tuesday, when Italy's bonds also came under pressure on the money markets.
The Milan bourse lost 2.4%, making it the worst-hit of the major European stock exchanges, all of which were down.
Bank stocks were hit particularly hard after a report in the New York Times that said Spanish and Italian financial institutions were overexposed to their respective countries' sovereign debts.
The spread between 10-year Treasury bonds and their German equivalent, meanwhile, went up to 387 points with a yield of 5.55% after climbing considerably last week.
The spread, a key indicator of market confidence in Italy's ability to weather the eurozone debt crisis, has been on an upward trend largely because of fears of contagion caused by Spain's financial troubles.
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