EUROPE was last night bracing itself for an accounting scandal to mirror the fall of Enron.

As police poured over the finances of Italian dairy group Parmalat, financiers were facing up to the possibility of losing millions of euros if the company folded.

Italy's Government was left wondering how it could bail the stricken company out of a debt mountain estimated in media reports to be between £2.8bn and £7bn.

Such is the concern about the scale of the financial black hole in the company's accounts, experts were calling the case "Europe's Enron" - a reference to the dramatic collapse of the US energy group, which crashed after it was discovered the firm had been treating the day-to-day running costs of the company as capital expenditure, which led to the company appearing to be more profitable than it was.

A new management board at Parmalat was last night seeking the protection of Italian bankruptcy legislation that will potentially give it two years' grace from its creditors in which to get its house in order.

New chairman and chief executive Enrico Bondi will consider all protection options available to him, including the Italian equivalent of the Chapter 11 bankruptcy shield employed in the US.

Meanwhile, the firm's founder, Calisto Tanzi, and two former finance directors Alberto Ferraris and Luciano Del Soldato, were yesterday named by Italian prosecutors as being under investigation.

Parmalat, with 35,000 employees in 30 countries, stunned markets on Friday when it said a document showing 3.95bn euros was held by Cayman Islands unit Bonlat Financing Corp had been declared false by Bank of America.

Tanzi opened his first milk pasteurisation plant in 1961 and built a dairy and food group that earned more than 7.5bn euros last year.

Ferraris was Parmalat's chief finance officer from March until November, when he was replaced by Del Soldato who held the post for just over three weeks before resigning on December 9.

Mr Bondi was due to meet Italy's industry minister in Rome late yesterday, two days after Prime Minister Silvio Berlusconi vowed his government would save operations and jobs at Parmalat.