With Muammar Gaddafi vowing to die a martyr or crush a growing revolt in Libya, one academic has warned that the North African state risks becoming a failed state with huge consequences for Europe and the world.
"There is a big chance that Libya will become a failed state which would be very dangerous for Europe and the rest of the world," Libyan-born Kareem Mezran, Director at the Centre for American Studies in Rome, told CNBC.
Italy's political and business links with Libya are extensive and Italian Prime Minister Silvio Berlusconi, already under pressure because of a sex scandal, has been widely criticized for his ties to Gaddafi.
"Gaddafi is fighting for his life and will not listen to Berlusconi or anyone else, there is no financial incentive that could convince the Libyan leader to listen at this point," Mezran said.
Wave of Refugees?
Italian stocks with exposure to Libya have plunged since the beginning of the week. Eni and Impreglio, which have significant operations in the country and others like Unicredit and Juventus in which Libya has big stakes have fallen sharply.
This despite trade in Milan being stopped by a technical problem for much of Tuesday's session.
Another problem for Italy could be illegal immigration if the crisis in Libya worsens, but Mezran says the problem will not just be Italy's.
"If we get a failed state it will be everyone's problem. Libya could become a safe haven for terrorists, this will not be just Italy's problem, it will be a problem for the region, Europe and the United Nations," he added.