Italy has 5 festivals in this guide, spread across 5 cities. They run in February, June and July, and festival-day temperatures range from 8°C (46°F) to 32°C (90°F), with nights down to 2°C (36°F). That range is the reason there is no single "Italy festival outfit". The answer changes by month and by site.
3 of them run in real heat (28°C or more), where loose natural fabrics beat coverage and a brimmed hat does more than any garment. 1 sits below 16°C, where the outer layer effectively is the outfit. 1 carries a high rain risk, which makes waterproof footwear a requirement rather than a precaution.
The ground matters as much as the sky. You will find city streets, city park, mountain and industrial site, which puts broken-in trainers or a low boot at the top of the list for most of these events. 1 of the 5 has camping on site, so outfits have to survive living in a bag on the ground for several days.
Stylistically the crowd here leans streetwear, glam, carnival and costume. Venice Carnival is the largest of them at around 500,000 people, and it sets the tone the smaller ones react to. None of that is a dress code. It is what you will see, which is worth knowing if you would rather blend in or deliberately not.