Juncker: Italy’s banking problems can be solved, EU will help

Jean-Claude Juncker in Strasbourg, 14 December. [European Commission]

Italy’s banking problems can be solved and the EU will do everything to help, European Commission chief Jean-Claude Juncker said yesterday (14 December), dismissing fears of something akin to the euro crisis.

New Italian Prime Minister Paolo Gentiloni has said his government was prepared to come to the aid of the country’s third largest bank, Monte dei Paschi di Siena (BMPS), if private rescue efforts fail.

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Italian Prime Minister Paolo Gentiloni’s new cabinet was officially sworn in yesterday (12 December) as the eurozone’s third largest economy raced to reassure Europe its political crisis was over.

The bank, seen as being in danger of failing if it is not recapitalised, needs to raise €5 bln in order to avoid a state-subsidised rescue.

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Italy has asked for more time to sell four small savings banks it bailed out last year, the European Commission said on Friday (29 September), saying it was open to the request.

“I do not think that we have to expect that the problems of the Italian banks have to be considered as unsolvable,” Juncker said in a televised interview with the German public broadcaster ZDF.

“We will do everything… to be helpful to the Italian authorities, indeed the government,” he said, speaking in German. “I do not believe that Italy could be the origin of something which could resemble a new euro crisis.”

EU readies contingency plan for possible Monte Paschi wind down

European Union authorities are making contingency plans for the possible winding down of Banca Monte dei Paschi if the Italian lender has a poor reading in stress tests this week and no private or public support is available, an EU official said.

The Italian government has been sending signals it is ready to help recapitalise the troubled BMPS should it fail to raise enough money from private investors to complete a badly needed strengthening of its balance sheet.

If that happens there are fears retail savers might be hurt with EU rules potentially preventing the government from fully covering their losses.

Juncker, who was interviewed on the eve of a Brussels summit of EU leaders, also defended the bloc’s diplomacy on Syria, which is on the summit agenda unlike Italy’s banking woes.

“Should we have sent soldiers? Would the Germans and the Luxembourgers, the Dutch, the Italians be ready to send soldiers to Syria?” the former Luxembourg prime minister asked.

Even with a still non-existant European army, he said, “I do not believe that there are many Europeans who want to die for Syria. But we urge with all means at our disposal that humanitarian solutions are strived for.”

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