It depends on the context really. If you are in a difficult or desparate situation, then "situazione disperata" as Marzia07 suggested is correct. If something is in "dire straits" as in need of reform or change, then it would be translated differently. Could you please give us a phrase??
In answer to your question, yes, really! I thought hard before I posted, because I prefer "translate into", but I have seen a lot of native-speakers use "translate to" and it doesn't really jar with me, so I reckon it is more right than wrong.
I would like to translate the following: The economy is in dire straits.
direi: L'economia si trova in strettezze.
FYI : dire straits / dire straights = When you are threading your way through troubles as if you were traversing a dangerously narrow passage you are in “dire straits.” The expression and the band by that name are often transformed by those who don’t understand the word “strait” into “dire straights."