Italy asks Europe for two more years to save Monte dei Paschi di Siena

ITALY. The Italian state has theoretically until the end of December to divest itself of the bank Monte dei Paschi di Siena (MPS), in which it holds 64% of the capital. But faced with its inability to find a buyer, it has just asked the EU to extend the deadline by two years, according to Reuters.

In 2017, the Italian government saved the bank from the brink of collapse by injecting 5.4 billion euros of fresh money. At the time, it received the EU's blessing, but with conditions. However, it will not be able to respect the terms of the agreement because UniCredit has not agreed to buy MPS.

Italy pleads for a reprieve as MPS seems to be recovering. It generated €186m in net banking income in the third quarter of 2021, or €388m in the first nine months of the year, compared with a loss of €1.53bn in the same period in 2020. It could therefore interest investors if Europe gives the bank time to recover. The good figures for the last quarter and the possibility of a positive outcome have also caused the MPS share to rise by 16% on the Milan stock exchange on Wednesday 1 December.

Italy is asking the EU to allow MPS to continue its recovery plan until 2025. The latter involves staff cuts (2,670 jobs), a significant capital injection (2.5 billion euros), and the sale of bad debts. In total, the bank needs 3.5 billion euros to resurface.