The European Union (EU) is reportedly planning to cancel €300m ($340m) in funding for the Turin-Lyon high-speed rail due to prolonged delays.
Funding may be suspended if new project tenders are not launched by the end of next month.
The move comes within a month of the Italian Government-commissioned report stating that the Turin-Lyon high-speed rail project will not be profitable.
Scheduled to be completed in 2025, the 270km high-speed route will run through the Alps, connecting the Italian city of Turin with Lyon, France.
The EU has allocated €813m for the high-speed project until next year, however, around €300m will be transferred to other projects if the project suffers further delays.
An EU official added that new tenders should be launched in March to enable Tunnel Euralpin Lyon Turin (TELT) to submit a progress report to the EU, as required under the contract with the European agency.
The project is currently facing stiff opposition from 5-Star Movement, a major partner of the ruling coalition in Italy, whereas the League party has been a proponent of the project.
The Italian Parliament recently passed a motion to rediscuss the Turin-Lyon high-speed rail. The re-assessment of the project may cause additional delays.
The rail link includes the construction of a 58km Alpine tunnel, which is referred to as the core section of the project.
TELT has dug 25km of the tunnel, including four access ways and around 6km of one of the two main passageways.