An internal note by Italy's second-largest lender, Mediobanca, says the country is heading for an EU bailout.

“Time is running out fast. The Italian macro situation has not improved over the last quarter, rather the contrary," the bank's top analyst, Antonio Guglielmi, said in a confidential memo to clients revealed in the British daily, The Telegraph, on Tuesday (24 June).

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He added that Italy will “inevitably end up in an EU bailout request” in the next six months if borrowing costs continue to rise and the economy shows no signs of recovery.

Italy is not running a budget deficit above the EU threshold, but it has public debt of over €2 trillion - the world's largest after the US and Japan.

Its borrowing costs recently climbed to close to five percent, a relatively high figure.

Meanwhile, the Italian economy contracted by 2.4 percent in the last three months compared to the same period last year.

Mediobanca in February issued a similar warning ahead of early elections, which almost brought former PM Silvio Berlusconi back into power.

Its fears are being echoed by ratings agency Moody's, which in April also said Italy might need outside help.

"We will have to verify the commitment of the new government and its ability to resolutely pursue the huge structural reforms the country needs to improve its creditworthiness. For now the situation remains difficult," Moody's said at the time.

For their part, top EU officials such as Herman Van Rompuy and French President Francois Hollande in recent days said the euro crisis is all-but over.

But if Italy wobbles, the size of its potential bailout would dwarf the EU's previous problems.

Meanwhile, the risk of a political upset to Italy's economic recovery is also getting worse.

Berlusconi, whose party is a key player in Prime Minister Enrico Letta's coalition government, was on Monday sentenced to seven years in jail for hiring an underage prostitute and for abusing his power as the then PM to cover it up.

The 76-year-old can appeal the verdict and is unlikely to go to jail.

But he has also been found guilty of tax fraud and his appeal, on technical grounds, in the tax case has already been thrown out.

If he is barred from holding public office, his party might leave the coalition, creating chaos at the top.

Letta's credibility has itself suffered in a scandal involving sports minister Josea Idem, from the PM's centre-left Democratic Party.

Idem resigned on Monday following allegations of tax evasion.

She says the claims are false. But the affair sits badly with Letta's recent pledge to clamp down on tax cheats.