Italy PM's Tuscan nightmare: the fall of 'Daddy Monte'

Fri Jul 8, 2016 12:25pm EDT
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By Silvia Aloisi

SIENA, Italy (Reuters) - In 1624, the Medici Grand Duke of Tuscany rushed to the defense of depositors of a bank that was by then already 152 years old, Monte dei Paschi di Siena, guaranteeing their savings at a time of economic crisis.

Nearly 400 years later, Italian Prime Minister and fellow Tuscan Matteo Renzi aims to do something similar as the world's oldest bank and Italy's third-largest lender again threatens the region's savers.

This time the stakes are much higher.

The collapse of Monte dei Paschi could not only impoverish thousands of ordinary Italians, it could lead to a wider banking crisis, help tip Renzi from power and provide another strong jolt to the European Union, already reeling from Britain's referendum vote to leave the group.

"The government must assume its responsibilities, save the bank and its investors, otherwise this gangrene will spread to the rest of the system," said Romolo Semplici, a 58-year-old real estate entrepreneur whose 22,000-euro investment in the bank's shares is now worth less than 200 euros.

"I've always been pro-European, but if Europe doesn't protect its own citizens then we should think twice if this the kind of Europe that we want to be in."

Government sources say Italy is considering options to prop up the bank, including a state guarantee that would enable the bank to raise money it would otherwise struggle to secure from skeptical investors. Many bankers say the bank will inevitably have to raise around 3-4 billion euros ($3.3-4.4 billion).

Monte dei Paschi declined to comment for this story.   Continued...

The entrance of Monte dei Paschi di Siena bank's headquarter is seen in downtown Siena July 1, 2016.  REUTERS/Stefano Rellandini