A steeper-than-expected recession will force Italy to issue a larger amount of bonds and bills this year, a senior Treasury official said, making state funding at the end of 2012 even more challenging for a country with the world's fourth-largest debt.

In an interview with Reuters on Tuesday, Treasury Debt Management Office Head Maria Cannata said Italy has upped its gross funding target for 2012 to 460-465 billion euros from a previous forecast of 440-450 billion euros.

The decision comes after the Italian government slashed in September growth forecasts for this year and the next and hiked its deficit and debt estimates.

"We will issue roughly 20 billion euros more than previously targeted as state borrowing requirements for 2012 have been revised due the weakening economy," Cannata told Reuters.

(Reporting By Francesca Landini and Luca Trogni)