ROME: Talks on creating a new Italian government entered a decisive phase Saturday as fears mounted that any new premier will have to handle a politically toxic banking crisis.
President Sergio Mattarella is trying to broker a deal among political parties on the creation of a caretaker administration to guide the country to elections.
A nationwide vote is due by early 2018 but could take place up to a year earlier if there is no deal. Foreign Minister Paolo Gentiloni emerged as the pundits’ favorite to succeed Matteo Renzi amid swirling speculation that the ougoing prime minister’s re-appointment was also an option.
Renzi resigned after a crushing defeat in last weekend’s referendum on constitutional reform, plunging the country into a political crisis just as the long-anticipated banking crunch landed in the finance ministry’s lap.
The need for a new government has become pressing following the European Central Bank’s decision to reject Rome’s request for more time to persuade investors to back a five-billion-euro private bailout for troubled bank Monte dei Paschi di Siena (BMPS).
The bank, identified as being vulnerable to failure in stress tests last year, had asked for an extra five weeks to raise the funds it needs to avoid a government bailout under which, under EU rules, debt holders will have to share some of the losses.
BMPS shares slumped more than 10 percent on Friday, taking this year’s slide in value to 85 percent. The bank’s board was holding crisis talks over the weekend. Saving the world’s oldest bank will be politically difficult for whoever oversees the operation.
Most analysts see it and other Italian banks as needing radical restructuring involving inevitable redundancies.
But there are many small investors who have BMPS bonds, and their savings will be hit in any rescue deal.
Imposing losses at smaller banks last year hit Renzi’s standing hard and was linked to at least one suicide.
The ECB appears to have judged that delaying a solution will only risk a wider crisis in the Italian banking sector that could have damaging implications for the rest of the eurozone. Italy’s biggest bank, UniCredit, meanwhile, is planning a major capital-raising operation of its own which may have to be repriced, delayed or pulled as a result of the current uncertainty.
President Sergio Mattarella is trying to broker a deal among political parties on the creation of a caretaker administration to guide the country to elections.
A nationwide vote is due by early 2018 but could take place up to a year earlier if there is no deal. Foreign Minister Paolo Gentiloni emerged as the pundits’ favorite to succeed Matteo Renzi amid swirling speculation that the ougoing prime minister’s re-appointment was also an option.
Renzi resigned after a crushing defeat in last weekend’s referendum on constitutional reform, plunging the country into a political crisis just as the long-anticipated banking crunch landed in the finance ministry’s lap.
The need for a new government has become pressing following the European Central Bank’s decision to reject Rome’s request for more time to persuade investors to back a five-billion-euro private bailout for troubled bank Monte dei Paschi di Siena (BMPS).
The bank, identified as being vulnerable to failure in stress tests last year, had asked for an extra five weeks to raise the funds it needs to avoid a government bailout under which, under EU rules, debt holders will have to share some of the losses.
BMPS shares slumped more than 10 percent on Friday, taking this year’s slide in value to 85 percent. The bank’s board was holding crisis talks over the weekend. Saving the world’s oldest bank will be politically difficult for whoever oversees the operation.
Most analysts see it and other Italian banks as needing radical restructuring involving inevitable redundancies.
But there are many small investors who have BMPS bonds, and their savings will be hit in any rescue deal.
Imposing losses at smaller banks last year hit Renzi’s standing hard and was linked to at least one suicide.
The ECB appears to have judged that delaying a solution will only risk a wider crisis in the Italian banking sector that could have damaging implications for the rest of the eurozone. Italy’s biggest bank, UniCredit, meanwhile, is planning a major capital-raising operation of its own which may have to be repriced, delayed or pulled as a result of the current uncertainty.
