Italian banks may have lost an average of 40 percent of their stock market value in the past year, but former Prime Minister Enrico Letta remains optimistic.
"I think and I'm sure that we can trust in the Italian financial system, because the Italian real economy is a good one and the performances of our companies' exporting is very good," Letta told CNBC on Friday.
However, Letta, now Dean of the Paris School of International Affairs at Sciences Po in Paris, said this was on the basis that Italy continued its work on reining in spending and using the money to reduce taxes.
"If the European situation is improving and if the government continues the spending review and cutting taxes to push recovery, we can trust in Italy."
He said the Italian government has been moving "in the right direction" after it approved a package of measures this week aimed at supporting the country's troubled banking sector.
However, a lot more now has to be done at a European level, he said, including stepping up the introduction of a "banking union" that would supervise lenders and should they fail, wind them down or rescue them.
"At a European level, we need to complete the banking union. We had important steps for the banking union, but we need now to complete it, and we need the European guarantee and the deposit working."
"It is necessary that the European Union gives to the market the idea to trust in this banking union system. We have to complete it with the capital market union."
Such a union would give greater investment protection and soothe the nerves of markets, investors and consumers, Letta said, adding that it was possible to have a "more convergent European banking system."
"Italy is very much depending on the European situation. Italy is different from France and Germany. We need Europe, and we need to perform well in Europe."
'I fear Donald Trump as US President'
With the 2016 U.S. presidential election race in full swing, who will eventually move into the White House is on the mind of both Letta and politicians worldwide.
"I think the American situation adds something new, and what is new is the fact that even without the migration problems and a big unemployment problem; people are angry against the establishment," said Letta.
"I think it is because of the new way to communicate and the role of the Internet in politics. I hope the American debate will develop some new ideas, because frankly speaking, as [a] European, I fear (Donald) Trump as president of the U.S."
What concerns Letta about the Republican candidate is Trump's ideas and his "lack of any experience" politically, adding that any U.S. president has to be "very careful" in how they speak.
"I think a president of the U.S. has to be very, very, very careful in speaking. I think Trump is not very careful in speaking. He says anything about anybody, and I fear that a president of the U.S. with all the responsibilities that the U.S. has in the world, with this very strange attitude that Trump shows (is worrying). I have some concern."
—By CNBC's Alexandra Gibbs, follow her @AlexGibbsy and @CNBCi