Italy should focus more on boosting economic growth rather than implementing additional austerity measures to ensure the sustainability of its public debt and the survival of the euro, Fitch Ratings said on Wednesday.

Italy, due to its large financing needs, is probably not only too big to fail but also too big to rescue, David Riley, head of sovereign ratings at Fitch, told analysts at a conference.

The success or failure ultimately of the euro depends on the success or failure of Italy within the euro, he said, less than a week after downgrading the country by two notches to A-minus.

Rome should focus on boosting economic growth this year because its government deficit is not so large - only about 30 billion euros of the country's gross financing needs for 2012, estimated at 360 billion euros, according to Fitch.

We don't think that fiscal austerity is self-defeating, Riley said. But nonetheless, further fiscal austerity, given where they are, probably wouldn't be credible and feasible. They should focus more on growth potential.

Riley warned that Italy's public debt will become unsustainable if economic growth is around zero and spreads rise above 400 basis points.

Italy's economy is expected to contract this year, after an estimated growth of only 0.6 percent in 2011.

If spreads fall to below 200 basis points, or to 150 basis points, and if growth is of around 1.5 percent, then you have a sustainable debt position, he said.

Spreads between Italy's 10-year bonds and comparable Bunds were around 387 basis points on Wednesday, according to Reuters data.

As for Greece, Riley said, the main risk is a disorderly debt default which would turn the country more vulnerable to capital flights and closer to a possible break up of the euro zone.

He stressed, however, that Fitch still believes Greece will not leave the euro zone.

(Reporting By Walter Brandimarte; Editing by Kenneth Barry and Andrew Hay)