Economy - - Dec 21,2016
Italy’s third-largest bank and world’s oldest surviving bank, Monte Dei Paschi di Siena, needs to raise around 5bn Euro in fresh capital by the end of this month to retain its lost track.
The Italian government and current Prime Minister, Paolo Gentiloni, has taken on a mission impossible. Mr. Gentiloni chaired a cabinet meeting which decided to put a proposal for approval in the Italian parliament for a $21 billion (20 billion euros) increase in public debt as a preventive measure to possibly protect the country’s lenders if the recapitalization of Banca Monte Dei Paschi du Siena SPA fails.
After the cabinet meeting, the government issued a statement late on Monday night. According to the statement, it could be essential to accept measures with the target of guarding savers if there were threats in the financial subdivision. The news signals that a multi-billion euro refinancing of MPS could occur within days. Seven other banks that are struggling under the weight of corrupt loans amounting to billions of euros may also require government recapitalization.
Monte Dei Paschi, newly judged the weakest of the European Union’s main banks, needs to dispose of a mountain of corrupt loans and hike 5 billion euros in capital by the end of December or else face the threat of being targeted down by the European Central Bank.
Italian Prime Minister Mr. Gentiloni, whose administration has only been in office for a week, is under pressure because private stockholders would suffer any losses under European Union bailout rules.
Economy minister of Italy Mr. Pier Carlo Padoan spoke at a press conference on Monday that, the money the government was seeking could be used for security sufficient liquidity in the banking system. "These resources could also be used as share of a program to boost capital at banks." Mr. Padoan , who kept his job when Matteo Renzi resigned as the premier, stated the effect on the debt would be “one-off, temporary” and said he was “honestly confused” by the criticism that the burden would plunge on taxpayers.