Italy's emerging banking crisis has the potential to bring down the entire Eurozone. That's according to one of Britain’s leading economic research centres. Danae Kriakpoulou at the UK’s Centre for Economic and Business research tells CCTV’s Richard Bestic that the next few months will be critical for the Eurozone' future.

A: Some Italian banks have seen their shares fall by 80% over the year. That is quite significant. Italian banks are under pressure because they have a high share of bad loans. Around 70% of loans in Italy are bad and that is a problem.

And especially given Brexit, which has injected even more uncertainty into financial markets, which has made the situation even more pressing in Italy. The crisis could spread to the rest of the Eurozone.

Q: Just how bad is the Italian Banking crisis, in the context of Brexit?

A: Italy is the Eurozone’s third biggest economy, it’s a big player and if the banking crisis spreads to the real economy we could be in trouble.

The Eurozone has had issues with Greece and even when Greece was thought of exiting the Eurozone, it sent very bad signals to the financial markets. Imagine if that happened with Italy.

We could even see the Eurozone break up, in that case. The impact of Brexit on Europe is felt through two channels – one is financial markets and uncertainty and the other is trade.

Trade will be felt through the longer term, but markets react very immediately to this news and bank shares especially throughout Eurozone markets have suffered a big loss after Brexit. Some Italian banks have seen their shares fall by 80% over the year. That is quite significant.