When Italian Prime Minister Mario Draghi returns from his brief summer break one of the thorniest items on his 'to do' list will be finally fixing the woes of the world's oldest bank, Monte dei Paschi di Siena (MPS).
General view of a branch of Monte dei Paschi di Siena , the oldest bank in the world, which is facing massive layoffs as part of a planned business merger, in Siena, Italy, August 11 2021. REUTERS / Jennifer LorenziniSolution needed to preserve financial stabilityDraghi has steered clear of direct involvement
The government thought it had found a solution this summer by brokering a merger with top Italian peer UniCredit, only for a political pushback to get in the way. He wants the state to help MPS join forces with other medium-sized lenders to act as a counterweight, with strong local roots, to the "big players" UniCredit and Intesa Sanpaolo.It is hard to exaggerate the role MPS has played in the history of Siena, where it was founded in 1472 to help the needy with cheap loans. It has long been the city's biggest employer and locals who traditionally referred to it as "Daddy Monte" have looked on in horror at its demise.
What UniCredit CEO Andrea Orcel - who as a Merrill Lynch banker in 2007 advised MPS on the Antonveneta deal - describes as the best M&A option on the table, entails state-funded job cuts that sources say may reach a third of MPS' 21,000 staff. The UniCredit deal could cost Italian taxpayers more than 5 billion euros in state support for layoffs, tax incentives and a commitment to reinforce the merged bank's capital, while MPS' future is fuelling tensions in Draghi's ruling majority.
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