Tanzi who until last week was chief executive of the company is at the centre of one of Europe's biggest financial scandals, judicial sources said.

  

The embattled Italian food group filed for fast-track bankruptcy protection under an emergency government decree, a company lawyer said.

   

Dario Picone told reporters in the northern city of Parma, near the dairy group's headquarters, that the firm was filing for protection from creditors under a decree adopted by the government on Tuesday.

 

Urgent plans

   

"We have presented the request under the decree," he said.

 

Meanwhile, the Italian government pressed ahead with urgent plans to beef up its regulatory system after billions of dollars slipped through the cracks at Parmalat.

   

After two emergency meetings to discuss Parmalat, government officials got to work on measures to give market regulator Consob more powers.

 

The reforms could be passed in an urgent decree on 8 January, bypassing the lengthy process of formal parliamentary approval.

 

"The whole system is at risk"

Giulio Tremonti,
Economy Minister, Italy

Consob is the regulatory authority for listed companies, but its powers are limited. While it can request documents from companies, it has no authority to demand them and must go through lengthy court proceedings if its request is not met.

   

Bank of Italy Governor Antonio Fazio, who under Italy's decentralised system is responsible for overseeing banks, blamed Consob on Wednesday for the Parmalat crisis.

   

"It was all born out of Consob's inadequacy, from insufficient discipline on the bond and share markets," Antonio Fazio told La Repubblica in an interview.

 

Regulatory decree

   

European Affairs Minister Rocco Buttiglione said the planned regulatory decree would aim to protect small investors and personal savings but would not interfere in the banking system.

   

But a broader shake-up of the regulatory system could be just over the horizon.

   

Economy Minister Giulio Tremonti wants to create a single regulatory body with sweeping powers over banks and securities markets, a move that would undermine Fazio.

   

The Bank of Italy currently oversees the sale of bonds by banks, including those of Parmalat and failed canned food group Cirio.

   

Tremonti was quoted by newspapers as telling ministers on Tuesday: "The whole system is at risk".