Skip to comments.Italy risks political crisis as MPS bank scandal turns 'explosive'
Posted on 01/30/2013 10:00:25 PM PST by bruinbirdman
Italian magistrates investigating losses at Banca Monte dei Paschi say the mushrooming scandal has taken a dramatic turn, with political fallout that threatens to rock the countrys elections next month and upset eurozone plans for a banking union.
The situation is explosive, said Tito Salerno, head of the prosecuting team in Siena, describing the fast-moving events at Italys third-largest bank as extremely grave.
The Milan bourse tumbled 3.4pc and yields on 10-year Italian bonds spiked 15 basis points to 4.31pc as the political scandal widened.
Monte dei Paschi (MPS), the worlds oldest bank dating back to 1472, is under investigation for covering up losses on derivatives and paying over the odds for its 9bn (£7.8bn) purchase of Banca AntonVeneta in 2007. Italys press alleges that the inquiry has unearthed a network of bribes and kickbacks, a claim denied by the bank.
The lender has lost 6.4bn since early 2011 and the damage is mounting. Italys weekly news magazine Panorama reports MPS could face another 500m losses from its Chianti Classico venture into property loans, a claim also denied.
MPS has had to be rescued a third time, issuing a 4.5bn convertible bond at a 9pc interest rate. The stock price has crashed 95pc.
What makes the case so delicate are the banks close ties to the Italian political Left. Right-wing critics claim it was a patronage machine for the Democratic Party (PD) of Luigi Bersani, current front-runner in Italys close-fought elections.
MPS is 35pc-owned by foundation that answers to the PD-controlled Tuscan province of Siena and was run by ex-Communist Giuseppe Mussari until his abrupt exit. The debacle has led Italian news bulletins and is sapping support for Bersani and ex-premier Mario Monti, the two pro-EU candidates committed to austerity and the EU reform
(Excerpt) Read more at telegraph.co.uk ...