Italy's financial regulator imposed temporary curbs on short selling today after a big plunge in stock market prices fuelled concern that Europe's debt crisis could be spreading to Italy.

The new measures, which apply until September 9, force investors with large short positions to declare them to the Consob financial market authority in a bid to avoid the volatility which dragged stocks down 3.47 percent on Friday.

Short selling consists of betting on the value of a stock falling. If used on a large-scale basis it can make the value of the stock market tumble and it was banned in many countries at the height of the global economic crisis.

"The measure reinforces the Consob's control powers during the current period of heightened volatility," the regulator said in a statement.

"Italian regulation is therefore aligning itself with the norms in force in other major European countries including primarily Germany," it added.

Investors with positions equivalent to 0.2 percent or more of a company's capital must communicate these to the Consob. They will also need to declare to the regulator if these positions change by increments of 0.1 percent or more.

The benchmark FTSE Mib index opened sharply down on Monday, falling 1.35 percent to 18,792 points. Banks led the drop with shares in Intesa Sanpaolo losing 2.06 percent and UniCredit down 1.87 percent at 1.209 euros.

Italian Prime Minister Silvio Berlusconi's Mediaset business empire was also down 1.32 percent at 2.994 euros after his company Fininvest was ordered by a court to pay 560 million euros (792 million dollars) to a business rival.

Like many other regulators, Italy's Consob banned short selling in October 2008 and lifted the interdiction in November 2009.

There has been growing political rhetoric in Italy against stock market "speculators" in recent weeks amid growing volatility.

Berlusconi warned last month that "locusts of speculation are only waiting for the right moment to pounce on their prey."