Italian treasury under siege over Monte dei Paschi deal By Reuters

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© Reuters. FILE PHOTO: A Monte dei Paschi bank sign is seen in Rome, Italy, September 30, 2018. REUTERS / Alessandro Bianchi / File Photo

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By Giuseppe Fonte and Valentina Za

ROME (Reuters) – Italy’s treasury is under fire from ruling parties seeking collateral for Monte dei Paschi employees and the local economy in Siena, after the ministry began exclusive talks to sell the Tuscan bank in difficulty in UniCredit.

Italy owns 64% of Monte dei Paschi (MPS), after a bailout of 5.4 billion euros ($ 6.4 billion) in 2017. It has pledged to hand over the oldest bank in the world in private hands by mid-2022, but its capital needs of 2.5 billion euros have made the search for a solution more urgent.

UniCredit began talks last week to buy “selected parts” of MPS, a day before a European-wide bank health check showed that a prolonged economic shock would wipe out the public lender’s capital.

The start of negotiations, which are expected to last 40 days, has sparked an avalanche of demands from ruling parties, with Economy Minister Daniele Franco scheduled to appear in parliament this week to answer questions on the subject.

The Treasury, hoping to finally resolve the ten-year state-controlled banking crisis, had not reckoned with immediate political hindsight.

“We do not agree with the idea of ​​dismantling the bank. The territorial roots of MPS in Tuscany, its workers and its brand must be preserved,” said Antonio Misiani, economic leader of the Democratic Party (PD) co- center-left leader. told Reuters.

Job cuts are the main problem for unions and politicians. Layoffs of nearly a third of MPS’s 21,000 current employees are expected and those cuts should be agreed before the deal with UniCredit is finalized and paid for by the state, a source familiar with the matter said.

“Cutting 6,000-7,000 jobs is simply unthinkable, workers need guarantees,” Giulio Centemero, a senior right-wing League party official, who also supports Mario’s government of national unity, told Reuters. Draghi.

The unions have called for a meeting with the Treasury, said Lando Maria Sileoni, head of the banking union FABI.

To erase its rescue plan, MPS had agreed to cut 4,800 employees as part of a restructuring plan until 2021.

MPS and politics have long been closely linked. Siena, where MPS’s central offices employ around 1,400 people, is a traditional stronghold of the PD party, which has often been criticized for contributing to the bank’s problems.

Today, the political stakes are even higher because the national leader of the PD, Enrico Letta, who does not have a seat in the parliament, chose an upcoming by-election in Siena to try to obtain one.

‘DIFFICULT TERMS’

In Italy, banks usually only fire people on their way to retirement and pay 80-90% of their salary for a period of up to seven years until they are entitled to their pension.

With an average cost of 200,000 euros for an employee four and a half years from retirement, the workforce reductions of MPS could cost the state more than 1.4 billion euros.

“We need to calculate how much UniCredit’s strict conditions for a deal are going to cost taxpayers and assess alternative solutions,” League’s Centemero said.

To consider an acquisition, UniCredit CEO Andrea Orcel demanded that any deal not affect the Milan bank’s capital reserves, while increasing UniCredit’s earnings per share by at least 10%.

Its conditions will be expensive for the state coffers, but Rome set a precedent in 2017 by paying Intesa Sanpaolo (OTC 🙂 4.8 billion euros to buy for one euro the good assets of two regional banks in the region. of Veneto.

As it has done with the banks of the Veneto, the state should keep the problematic loans of MPS and the legal risks associated with mismanagement.

A person familiar with the matter said the Treasury is confident that MPS bondholders will not be asked to share the costs that taxpayers will face in closing a sale to UniCredit.

The final word on MPS’s fate rests with Prime Minister Draghi, who is not actively involved in talks with UniCredit, a source in his office said.

A government source said the Treasury is committed to protecting jobs and ensuring UniCredit hires as many workers as possible. The Treasury will also work to preserve the MPS brand in some of its Tuscan branches, the source added.

($ 1 = 0.8413 euros)





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