BANKERS warned today that Italians have no choice but to accept a government that agrees to play by the European Union’s economic rules.

The Milan stock index was down nearly 3 per cent, weighing particularly hard on banks, and Italian bonds suffered a plunge reminiscent of the worst days of the financial crisis of 2011.

The government’s borrowing rate for two-year money more than doubled by over 1.5 percentage points to 2.4 per cent, indicating a surge in investor concern.

“We should now call this a crisis,” said Kit Juckes, an analyst at French bank Societe Generale.

Ratings agency Moody’s warned that it would cut Italy's rating — now just two notches above junk level — if the next government doesn't present an austerity budget.

And in a speech today on the state of the economy, Bank of Italy governor Ignazio Visco warned against spooking the rich, saying they would flee abroad with their wealth.

He also claimed that there was no alternative to the economic policies favoured by the EU, saying: “We are not constrained by European rules but by economic logic.”

Mr Visco’s comments followed President Sergio Mattarella’s rejection of an anti-euro finance minister proposed by the far-right League and the anti-immigration Five Star Movement, causing the two parties’ coalition plan to collapse. Mr Mattarella then picked unelected former IMF official Carlo Cottarelli to be caretaker prime minister.

Mr Cottarelli became known as “Mr Scissors” when he served as an Italian government minister tasked with slashing public spending.

Parliament’s right-wing bloc and Five Star, the two largest groupings, vowed to oppose a Cottarelli government in a vote of confidence expected this week.

The two are hardly a radical challenge to the Establishment, given that they have pledged to make deep tax cuts and round up and deport 500,000 refugees.

If Mr Cottarelli doesn’t pass the confidence vote, he is likely to lead an interim government until new elections take place at the end of the summer.