Surging labour costs will leave Italy, Portugal, Greece and Spain unable to compete with a resurgent Germany and Italy facing "economic asphyxiation", according to a report by Lombard Street Research.
Speaking to the Daily Telegraph, report author Charles Dumas advised Italy ''to get out of EMU" before its industry was decimated.
EU figure show that unit labour costs have fallen 1.3pc in Germany since 1995, while rising 38.7pc in Italy.
"Italy is odds on favourite to fall out of monetary union. We have a clear-cut case of disintegration of monetary union," Dumas said, predicting that the bond markets would ultimately trigger a crisis.