“Italian banks are directly exposed … through their holdings of Italian government debt,” Fitch Ratings warned last week. “Many of the country’s banks hold large amounts of Italian sovereign debt relative to their capitalization.”

Italy’s banks have been struggling for years with high costs, low returns and over 200 billion ($229 billion) worth of bad loans. Fitch analysts said that the sector has gotten better at dealing with bad debt, but they warned that progress could stall if investors are scared off by the government’s economic plans.

“We can get into a situation where things were slowly getting better, to one in which banks are again under pressure,” said Federico Santi, an analyst at the Eurasia Group.

Shares in Banca Monte dei Paschi di Siena (BMDPY), the world’s oldest lender, are down a staggering 62% since January. Intesa Sanpaolo (IITSF) has lost 29% in the same period, while UniCredit (UNCFF) is down almost 28%.

The stock declines reflect investor fears over the strength of the banks and the election of a government formed by populist parties who have at times questioned whether the country should continue to use the euro.