My money is on Italy at 10/1 but it will be very tough. They could have the following draw:
2nd round: Japan
QF: France
SF: Germany/Holland
F: Brazil
That is very tough. Japan would be my outside bet to reach the final at 110/1 (Betfair). France are still very strong as are Holland/Germany (at home). If Italy fail to win their group they'd most likely face Brazil in the 2nd round.
In saying that, Italy are probably the best team in Europe atm. They beat us in Lansdowne and beat Holland very comfortably in Amsterdam. They also destroyed Germany in their last match.