It is very difficult to say why such great soccer nations like Germany and Italy are in crisis. German and Italian clubs are very successful in European club competitions, but their national teams are not, with the exception of Italy at the last EURO.
For me, the main favorites at the EURO are France, England, Spain, Portugal, Belgium, but also Croatia as a hidden favorite.
The national team that has Modrić and won 2 medals at the last 2 world cups simply can't be underestimated.
However, in my opinion, France has the best chance.
On the particular case of Italy I think they are facing some sort of identity crisis, when I watch Italy I like the way they play and they are way more entertaining now than on their entire history, however they have failed to qualify to the world cup twice in a row, when on their entire history they only failed to qualify once, as during the very first world cup many European teams decided to not participate, so people are not happy with this as they preferred their national soccer team to play awfully and still win, a formula which gave them four world cup championships.