The rise of populist politics in Italy should still be front and center for investors in Europe, despite recent tensions in Spain with Catalonia possibly declaring independence in the coming days.

“Italy is not generating sustained growth and it still has the issue of bad loans,” a Brussels-based official, who preferred to remain anonymous due to his participation in key EU economic meetings, told CNBC over the phone.

“The euro zone is growing, even Greece is growing … But let’s not get carried away with the short-term success,” he added.

Broadly, the region has seen improvement since the days of the sovereign debt crisis of 2011. Growth has returned to the bloc, unemployment has fallen and business activity has expanded. But Italy is seen by European many economists as the biggest risk to the euro zone at the moment. The economy is set to grow below 1 percent this year and slightly above that threshold in 2018, according to recent forecasts from the European Commission.

Added to that, Claus Vistesen, the chief euro zone economist at Pantheon Macroeconomics, said that new elections in Italy are just around the corner.

“It’s certain that the Five Star Movement (Italy’s populist party) will do very well in the upcoming election,” Vistesen told CNBC Tuesday over the phone.

Italian voters are due to elect a new government at the start of next year, though there’s not a certain date set. At the moment, the populist Five Star movement is polling around the same numbers as the governing PD Party, led by former Prime Minister Matteo Renzi. Five Star’s new leader Luigi Di Maio has softened the party’s stance on the euro, but he told CNBC last month that he wants to renegotiate treaties within the EU that “are capping the growth of Italy.”

Five Star’s stance is viewed as a risk to Italy’s compliance with European fiscal rules. These rules constrain the ability of euro zone countries to spend, as they need to respect a 3 percent threshold for their deficit-to GDP (gross domestic product) ratio. Italy’s deficit is set to reach 2.2 percent of its GDP this year, in line with European rules. But its government debt is already above EU’s limit — nations are also supposed to keep their public debt below 60 percent of their GDP. Forecasts from the European Commission suggest it will rise to 133.1 percent of GDP this year. A populist government could potentially jeopardize Italian finances further.

“Beyond Catalonia, it is the Italian election we are concerned about,” Andrea Cicione, head of strategy at TS Lombard, told CNBC Thursday.

He underlined that the rising presence of populist parties is a risk for Italy’s fiscal policy, given their policies to increase spending. When it comes to Catalonia, analysts seemed divided over its impact on the euro zone. Vistesen said that Catalonia is still a long way from becoming independent, though “the longer the situation drags, the riskier it will get for stock markets,” he admitted.

Spain’s Ibex 35 stock index has been on a downward trend for most of the week, after an illegal referendum on Catalonia’s independence. The national government doesn’t recognize the vote.

“We see a risk that this escalation may damage the coordination and communication between the two governments, which is essential to Catalonia’s ability to service its debt on time and in full,” Standard & Poor’s warned on Wednesday.