The event is likely to be closely monitored by investors, with many concerned Italy's euroskeptic leaders will stick to contentious spending plans — and exacerbate the country's growing budget deficit and massive debt pile.
"An Italian exit from the EU and an Italian exit from the euro would be a very, very painful event for the European and therefore world banking system. It could require the biggest bank recapitalization ever — bigger than the U.S. in 2008," Jim McCaughan, CEO of Principal Global Investors, told CNBC's Steve Sedgwick at the Ambrosetti Forum in Italy on Friday.
"(But) with public opinion in Italy remaining pro-EU, so long as that stays, I think they are not going to get into that kind of tension," he added.
Recapitalization refers to a company restructuring its debt and equity mixture to make its capital structure more stable. During times of financial crisis, such as in 2008, governments can also intervene when the solvency of banks and the broader economic system come into question....