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MILAN, Dec 23 (Reuters) - Measures Italy's government adopted in the early hours of Friday to support the banking sector starting with a bailout of Monte dei Paschi di Siena should reduce contagion risks for other lenders, credit rating agency Moody's said.
"The proposal is credit positive for senior bondholders and depositors of the banks involved as it increases their protection through the additional capital," the agency said.
"It should also reduce the probability of contagion spreading to stronger banks following the potential resolution of a weak bank."
Italy on Friday approved a 20 billion euro ($20.9 billion)fund to support weak banks and Monte dei Paschi said it would apply for a precautionary recapitalisation by the state after failing to raise privately 5 billion euros. ($1 = 0.9579 euros) (Reporting by Valentina Za)