Italy paves way for a $21 billion rescue plan for ailing banks

The Italian government cleared the way for the potential rescue of lenders, including Banca Monte dei Paschi di Siena SpA, by seeking permission from parliament to increase the nation’s public debt by as much as $21 billion (around AED 77 billion). Monte dei Paschi, Chief Executive Officer Marco Morelli, is scampering to find investors to back a private 5 billion-euro capital increase, which also includes a share sale and a debt-for-equity swap. Should his efforts fail, Prime Minister Paolo Gentiloni’s cabinet has laid the groundwork for a state-sponsored cash injection with the possible sale of bonds. New on the job, Gentiloni was at pains to describe the steps toward state aid as a “precautionary” measure in a news conference at the end of the cabinet meeting in Rome. At 2.23 trillion euros, Italy’s public debt is already the second-biggest after Greece as a percentage of gross domestic product and the fragility of the country’s lenders coupled with recent political instability has put financial markets on edge. Finance Minister Pier Carlo Padoan, who kept his job after Matteo Renzi resigned as premier, said the impact on the debt would a “one-off, temporary” and said he was “frankly perplexed” by criticism that the measures would be financed by tax payers. (Lorenzo Totaro and Ross Larsen/Bloomberg)

More from Business News

Blogs