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.
I feel like more than identity, it's more about getting younger players to show up. It's obvious that they built a good squad before this one, and they won and they were all happy about it. But then they ended up losing and not even going to world cup as well, because some of their good players retired.
I feel like they will do better during this euro cup compared to not even be in world cup, they will be at least in this, but they won't win it. They just need a whole new generation to grow up and be better as well. If they can do that then they could end up with a better result. How did France become this good? They found players that are great and close to each other at age, Italy needs the same thing, kids at young 20's to play and be good together.