With the yield on Italy's 10-year bonds concluding their second week above the 6-percent threshold and Italian economy being the center of attention at the Group of 20 Summit in France, economists believe Italy is about to become the focal point of the battle over the future of European economy.

Italy has been struggling economically for years, but the situation has come to a head in recent months amid worries that the country could be forced to default on its sovereign debt.

The crisis in nearby Greece -- where Prime Minister George Papandreou faces a confidence vote and there is open speculation that the country could be forced out of the eurozone -- has only heightened tensions in Italy.

In a research note, Goldman Sachs economist Francesco Garzarelli said that the faceoff about the European Union's role in Greece was a kind of "proxy war" over what will happen in Italy.

Antonio Bolzano, an economist with ABS Securities, echoed his view. "If Italy is allowed to default or if the economy in Italy collapses, it won't matter what happened in Greece," Bolzano said.

The problem is that the price of financing the debt rises as the situation becomes less stable and the perceived risks increase. And as the cost of financing the debt rises, the situation gets worse especially for an economy like Italy's, where the total debt is so large.

Yields on Italy's benchmark 10-year bonds reached 6.34 percent earlier this week, the highest level since the creation of the eurozone in 2002. Though they have backtracked slightly since then, they are about to conclude their second consecutive week above 6 percent. As recently as the end of last year, yields on the country's 10-year bonds were below 4 percent.

It could be even worse: the European Central Bank (ECB) has been an active buyer of Italian bonds in recent weeks, as it works to keep the yield within normal bounds.

"The current bond yields are unsustainable for a country whose debt sits at 120 percent" of its gross domestic product, Benjamin Reitzes, a senior economist with BMO Nesbitt Burns, said.

Italy is working hard to address the problem: it has released three separate austerity plans since July, aiming to reduce debt by raising taxes and cutting government spending. In the latest plan announced late Wednesday, the government said it would raise capital by selling off state-owned land and remaining government stakes in former state companies.

For his part, Italian Prime Minister Silvio Berlusconi has vowed his country will have a balanced budget by 2013, though many economists believe chances of Italy doing so within that time frame are slim.

Meanwhile, the G-20 Summit in Cannes, set to wrap up Friday, turned its attention to Italy in its final hours. It announced the Italian economy would be put under the surveillance of the International Monetary Fund (IMF), and G-20 leaders pushed Italy to take more steps to right its economic ship.