Milan's FTSE MIB lost 2.39% to close at 16,076 points on Tuesday, with banks hit hard and media stocks soaring.
Italy's biggest banks, Intesa SanPaolo (-5.8%) and Unicredit (-4.5%) tanked more than others on Tuesday.
Fiat (-4.27%) was also among Milan's worst-performing stocks.
The company that controls television station La7 soared 21.57% after news broke of interest expressed by Rubert Murdoch's News Corp.
RCS, which controls the national newspaper Il Corriere della Sera, gained 22.7% on news that Tod's entrepreneur Diego della Valle had increased his stake to 8.695%.
Tuesday proved a poor day also for other European markets with the exception of Athens which saw its General Index rise 2.86% to 755.98 points.
Paris's CAC 40 (-1.15%), Madrid's Ibex index (-1.1%), Frankfurt's DAX (-0.76%) and London's FTSE-100 (-0.43%) all closed significantly down.
Meanwhile the spread between interest rates on Italian 10-year bonds and the German bund closed nearly unmoved from Monday at 341 basis points. The yield on Italian 10-year bonds was 5.05%.
The spread between interest rates on Spain's 10-year bonds and the German benchmark on the secondary market rose during the day, but came back to Earth after the Spanish government's successful bond issue Tuesday. The difference between interest rates on Spain's boons and the German bund closed at 426 basis points with a yield of 5.85%, after hitting a peak of 6.06% - the highest since September 7.