Italy faces €17B bailout terms after two local banks default

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Italy’s government this week is facing the arduous process of bailing out two of its national banks at a cost of €5.2B euros.
The news comes only two days after the European Central Bank ECB warned that the banks were at high risk of “failing or likely to fail” due to their declining cash reserves. Italy’s Economic Minister Pier Carlos Padoan said Rome could also offer €12B worth of securities for potential losses from precarious loans.

The agreement followed months of debate over the fate of the world’s oldest bank and Italy’s fourth-largest lender – Monte dei Paschi. This bank performed the worst in 2016 ECB-led stress tests.

Monte dei Paschi asked for state aid in December 2016 to help cover a cash deficit of just under €9B after investors declined to put more funds into the troubled bank. The bank has been suffering after billions of euros invested into property ventures turned out to be a lost cause. The rescue will cost Santander about 7bn.