This Sunday's referendum in Italy could kick off another banking crisis in Europe, according to one economist.
"In my view the biggest risk is actually for the banking sector, even more so than political risk, and there will be some political instability," Megan Greene, chief economist at Manulife Asset Management, told CNBC on Tuesday.
Italian voters have been asked to approve reforms to the country's constitution, but most voters see the upcoming referendum as a vote on the prime minister and the current government. Prime Minister Matteo Renzi has previously stated that he would resign if the reforms are rejected. Expectations are that voters will say "no" to the reforms and bring political and financial instability back to the third largest euro zone economy.
"If you have a crisis in the Italian banking sector kicking off again, not only that could spread across Europe but also the solution that Renzi may come up with to just break the rules and bailout the banks, in which case he would be massively undermining (the) banking union, which is actually the only area where they made progress in Europe since the beginning of the crisis," Greene added.