ROME (Reuters) - The collapse of two regional banks in Italy's Veneto region would trigger a systemic crisis that risked dragging down the whole domestic economy, Economy Undersecretary Pierpaolo Baretta said on Tuesday.
Banca Popolare di Vicenza and Veneto Banca have requested a state bailout to help fill a combined capital shortfall of 6.4 billion euros ($7.2 billion).
However, sources have said the EU Commission has demanded an additional injection of 1.2 billion euros by private investors before taxpayer money can be used and Rome is struggling to find any investor willing to stump up the money.
The Italian government remains opposed to any form of bail-in for the two banks, but will not proceed with a precautionary recapitalization for the lenders before securing a green light from the European Commission, Baretta said.
Italian newspapers have said the government is considering pressing ahead with a precautionary recapitalization even without the approval of the EU.
Reporting by Stefano Bernabei; writing Francesca Landini