Monte dei Paschi's Christmas miracle is here...
The Italian parliament has given the go-ahead today for a €20 billion bailout of the country's most in-trouble banks, with Monte dei Paschi di Siena to get its slice of the pie as early as this week as it dangles on the precipice of financial doom.
Monte dei Paschi has been struggling over the past few days to raise €5 billion in capital through a debt-for-equity swap and share placement, with time set to run out for the rescue plan on Thursday and reports that key investor Atlante has added new conditions for its tentative participation.
Italian's third largest – and the world's oldest – bank is now saying that it could run out of liquidity in four months, despite giving estimates of 11 months on Sunday. European Banking Authority (EBA) stress tests showed it to be Europe's weakest major financial institution in July.
The state is now permitted to borrow money to provide "an adequate level of liquidity into the banking system" with parliament approving that a lender's capital could be backed up by "underwriting new shares".
Before the vote, Minister of Economy and Finances Pier Carlo Padoan moved to reassure people who were concerned that a Monte dei Paschi bailout would hit investors due to EU rules requiring them to bear losses:
"The impact on savers, if an intervention should take place, will be absolutely minimised or non-existent."
Italy has the second-highest debt burden in the Eurozone after Greece, with 133% of annual output on its shoulders.
Failure for Monte dei Paschi would not only threaten thousands of Italians' savings but also undermine other Italian banks, including the country's biggest – UniCredit.