The muzzle looks OK.
There should be upwards pressure holding the muzzle firmly against the "corners" of the little window in the top of the hole for the barrel.
This spring pressure is provided by the spring and plunger that SHOULD be between the rear of the nowse-cap and the barrel.
Further back, there should be another screw along the bottom of the fore-end, near the sling swivel / outer band.
This screw, and another spring, which fit into the INNER band around the barrel, should be pulling the barrel downwards slightly.
All of that is to "tune' the barrel to Mk7 ball ammo.
Mk8 Privi Partizan or any other commercial ammo will require a different arrangement.
Further back, if the fore-end wood is not solidly held firm by the "angled" lower surfaces on the receiver / body, any corrections to the fitting at the muzzle end will not have much effect.
I recall that Italyproduced a LOT of .303 ammo, just under a different name, before and after the last great unpleasantness. If you are reloading, see if you can find some of the FLAT based bullets from local 7.7 rimmed ammo, Load them in new cases with a relatively fast powder and see what happens.
There was a rumour, based on their own internet sites, that the Russians AND the Ukranians were producing .311", 174gn, flat-based FMJ bullets and even loading it in ammo, (7.62 x 54R) for export. You are a LOT closer to these sources than those of us in Australia.
Good luck and keep us posted with your progress.