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Business

Italian government approves rescue package for Monte dei Paschi bank

The world's oldest lender, Monte dei Paschi di Siena, failed to raise enough money on markets in a last-ditch recapitalization attempt. The government stepped in to prevent the bank from being wound down.

The Italian government announced in the early hours of Friday an emergency decree to rescue the stricken bank. Prime Minister Paolo Gentiloni said after a cabinet meeting it was aimed at ensuring "the widest possible" protection of citizens' savings and to make the Italian banking sector "stronger and more solid." 

Monte dei Paschi di Siena (MPS) announced Thursday it had not been able to raise enough money on markets for its recapitalization scheme.

The Tuscan lender, the third-largest in the country, said in a statement that its four-day attempt to raise 5 billion euros ($5.2 billion) from private investors "did not end successfully."

The government had indicated in recent days that it would be willing to take measures to support the bank.

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Italy's banking dilemma

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On Tuesday, the government in Rome got permission from parliament to create a special 20-billion-euro rescue fund for the country's ailing banks, including MSP. The money will be raised through fresh borrowing.

Monte dei Paschi was founded in 1472 and has seen many ups and downs in its history. It's now saddled with a mountain of non-performing loans and urgently needs money to cover losses on them.

The lender said Wednesday it would be running out of money sooner than previously thought. It reckoned that it would be out of liquid resources within four months. In an earlier estimate, the bank had stated it would survive for another 11 months without a fresh shot in the arm.

hg/jd,jm (dpa, AFP)

 

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