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Monte Paschi rescue at risk after Renzi referendum

Monday, December 05, 2016 - 01:39

A 5 billion euro rescue plan for Italian bank Monte dei Paschi is hanging by a thread after Renzi's heavy referendum defeat tipped the country into political turmoil. Ciara Lee reports.

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It's the world's oldest bank and it's beginning to feel its age. Italy's Monte dei Paschi is saddled with 46 billion euros of bad loans and needs to raise funds by the end of the month to stay afloat. A 5 billion euro rescue plan now hangs in the balance after Prime Minister Matteo Renzi's defeat in a referendum. Renzi is stepping down after his constitutional reform was rejected. It's left a share sale later this week by Monte dei Paschi far from certain, despite the unthinkable consequences of it not going ahead. SOUNDBITE) (English) RESEARCH DIRECTOR AT CITY INDEX, KATHLEEN BROOKS, SAYING: "We think that any government or the Italian government, likewise the European authorities will be absolutely mad to let the Italian banks go to the wall just because the hell it could unleash on the European banking sector including key banks like Deutsche Bank." But EU finance ministers meeting in Brussels brushed off the concern. (SOUNDBITE) (English) EUROPEAN ECONOMIC AND FINANCIAL AFFAIRS COMMISSIONER, PIERRE MOSCOVICI, SAYING: "I am very confident in the capacity of the euro zone to resist to all kind of shocks. I think we now have a very solid system, a solid governance, a strong banking union." so I'm confident." (SOUNDBITE) (English) DUTCH FINANCE MINISTER AND EUROGROUP CHAIRMAN, JEROEN DIJSSELBLOEM, SAYING: "The problems that we have today are the problems that we had yesterday and they still have to be dealt with and that process will continue." as far as I am concerned." But Italy's Atlas fund - created this year to help struggling banks - has already handed out its 4.25 billion euro reserves to small lenders. And a failure at Monte dei Paschi risks complicating UniCredit's own capital-raising plans. Its shares were suspended from trade after falling 5 percent. A further blow could come from ratings agency DBRS. It says the referendum was negative for Italy's credit ranking and warns it's now at risk of a downgrade.

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Monte Paschi rescue at risk after Renzi referendum

Monday, December 05, 2016 - 01:39