Italian Taxpayers Will Buy Out Troubled Banks, But Banks Will Cut 40K Jobs

ROME Italy will pay up to $19 billion dollars to break up two insolvent Venetian banks, which have posed a threat to country’s banking system, the government announced Sunday.

Both face bankruptcy and European authorities had urged Italy to devise a rescue framework, selling off the good assets of the stricken Banca Popolare di Vicenza and Veneto Banca and transferring their toxic assets to a “bad bank,” essentially financed by Rome.

The Italian government will stage the rescue with support from the country’s biggest retail bank, Intesa Sanpaolo, which will take up the good assets to protects the two Venetian banks’ customers and to minimise staff lay-offs.

The European Commission in a statement said it “has approved, under EU rules, Italian measures to facilitate the liquidation of BPVI and Veneto Banca under national insolvency law”.

EU competition commissioner Margrethe Vestager said that Italy considers state aid necessary “to avoid an economic disturbance in the Veneto region”.

She added that “Italy will support the sale and integration of some activities and the transfer of employees to Intesa Sanpaolo”.

There is also the issue of some 3,500 to 4,000 bank employees set to lose their jobs as well as associated early retirement costs, La Repubblica reported Saturday.

Earlier this month, the EU anti-trust authority approved Italy’s massive rescue of another troubled bank, its third-largest and oldest, Monte dei Paschi di Siena (BMPS).

Founded in Siena in 1472, BMPS has been in deep trouble since the worst of the eurozone debt crisis.

Rome is set to take a majority stake on a provisional basis to prevent bankruptcy and inject capital in line with EU rules, while limiting the burden for Italian taxpayers after the lender failed to raise funds on the market last year.

In exchange, Rome must accept a drastic EU-approved restructuring plan for BMPS expected to involve mass layoffs.

(AFP, pht)

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