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Why stagnant Italy's reforms may not be enough

Italy is heading in the right direction, but structural reforms and stimulus need to go "much deeper," the country's former economic minister told CNBC.

"We can certainly be more optimistic because of ECB policy, QE (quantitative easing) is effective but…it's not enough," Corrado Passera, former economy minister of Italy, told CNBC Friday.

"We now have a situation which can push the economy. But we need much more - we need more economic stimulus and much deeper structural reforms."

Speaking to CNBC on the sidelines of the Spring Ambrosetti meeting at Lake Como, Italy, Passera said that while Prime Minister Matteo Renzi talked a lot about reforms, not much was actually being done.

Read MoreWhy Italy and investors are brushing off downgrade

"He's announcing a lot of things but the content of these reforms is not courageous enough and forget about implementation for the time being," he said. "That's a real problem…there needs to be more attention on execution."

Rome, Italy
Sylvain Sonnet | The Image Bank | Getty Images
Rome, Italy

Mari Kiviniemi, former prime minister of Finland and deputy secretary-general of the OECD, agreed that Italy needed to implement labor market reforms – and more – for its economy to recover.

"Only by implementation of reforms will Italy achieve (growth). But after that you really have to look at what else is needed, as we think that is not enough," she told CNBC, also speaking from the forum in Lake Como.

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As Greece continues to dominate the headlines, a focus on other countries within the euro zone has been notable for its absence. Italy is not out of the woods yet, however.

In the fourth quarter of 2014, Italy's gross domestic product (GDP) was flat from the previous quarter, the country's statistics agency, Istat, reported last week. It indicates a failure by Italy to rebound from its long-running recession.

Istat also confirmed earlier estimates that GDP fell 0.5 percent from the same period in the previous year. This was the third consecutive yearly GDP drop.

Meanwhile, Italy's banking sector is burdened with non-performing loans which can deter lending to the businesses – particularly small and medium-sized ones -- on which Italy's economy relies.

In January, for example, non-performing loans at Italian banks came in at 185.5 billion euros, up 15.4 percent from a year before, central bank data showed.

The level of bad debt held by Italian banks has prompted calls for a "bad bank" - like Spain has - into which it could offload its bad loans has been mooted, although the proposal is controversial.

Passera, for one, said he didn't "believe in the bad bank concept."

"I don't believe in these state interventions to fix private banks' problems, but again that's not the main problem," he said. "We have to push the economy and investment – both public and private- and there is nothing like that on the way today."

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt. Follow us on Twitter: @CNBCWorld