Italy, and not Turkey, is the biggest threat to European banks

Last week, the European Central Bank ECB) voiced its concern that the currency crisis in Turkey can cause problems for the banks of the old continent

But the real problem for the banking industry in Europe is Italy and what will happen in the country in the coming months, says analyst Tom Kinmont, a strategist with fixed income at ABN Amro

"The problems in Italy … will dictate the discussion in the European banking sector over the next three to five years over the next three months," said CNmin, quoted by CNBC.

The Italian economy is the third largest in the EU and the new coalition government in the country is currently working on the budget for the coming year. His financial plan will be closely monitored by EU officials and, in particular, by market players following promises to increase public spending

Investors are concerned about rising pensions and social benefits amid the high public debt of Italy, the largest in the eurozone and accounts for about 130% of the gross domestic product

If market players do not approve the next budget, which will be released in October, the costs of maintaining the Italian debt are likely to rise, and this can be impact on European neighbors and cause problems for some European banks that have Italian debts

Kinmont believes that there are other events besides the budget that could cause problems for European banks

Credit rating agencies should make their new assessment for Italy the next release weeks. Italian banks still have a high percentage of non-performing loans, and the uncertainty about Rome's policy makes it increasingly difficult to predict what could happen to the banks as a result.

After the sovereign debt crisis, investors began to worry about the risks of spreading in the euro zone in 2011.

"The problem with Turkey remains on the radar, but it is especially concentrated at bank level and all eyes will be directed to Italy, "says Kinmont.

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