* Intesa wants just healthy parts of Veneto lenders
* Clean-up costs could be dumped on state
* Rome criticised for bending rules on bank bailouts
By John O’Donnell and Silvia Aloisi
FRANKFURT/MILAN, June 22 A clumsy attempt by
Italy to tackle problems at two Veneto-based banks by allowing a
major lender to cherry-pick their prime assets for a pittance
has left the government testing the boundaries of European law.
With a deal expected within days, critics are concerned that
Rome is exploiting loopholes to bend EU rules designed to
prevent state bailouts.
One European official privately admitted to “exasperation”,
after the European Central Bank and European Commission have
tussled with Rome for years over how to solve its banks’
problems within EU law.
On Wednesday, Italy’s biggest retail bank Intesa Sanpaolo
laid down tough conditions to buy the healthy parts of
the two Veneto banks for just 1 euro, a move that would force
the state to foot the bulk of the bill.
Intesa said it would only take the banks if they were
stripped of bad loans and risks, prompting criticism from those
who designed the EU regime to stop the state from having to
shoulder losses in bank crises, passing them on to investors
That solution also contrasts starkly with Santander’s
recent overnight rescue of a struggling lender in
Spain, where it too paid just 1 euro but took on the smaller
bank’s troubled loans and will raise billions to clean it up.
Rome is taking advantage of a flexibility in European rules
that permits routine insolvency proceedings for banks not
considered systemically important, allowing the process to be
handled by the state rather than EU authorities.
One EU official said state aid in this case might be
technically possible given that banks’ shareholders and junior
bondholders are also going to take a hit.
But critics said Italy was being allowed to cut corners.
“The Italians do not respect the rules. The ECB and the
Commission are too weak to enforce them,” said Sven Giegold, a
German member of the European Parliament. “This is destroying
Italy is the last country in the euro zone to get to grips
with the problems of its banking sector, meaning it faces
stricter ‘bail-in’ rules – written by Giegold and others and
introduced last year – that impose losses chiefly on bondholders
With elections due next year and much of its banks’ debt in
the hands of ordinary Italians, Rome wants to avoid this step.
“The signals from Italy are very negative,” said Volker
Wieland, one of the German government’s economic advisors.
Wieland accused Italy of “looking for exceptions” to the
rules, warning that such an approach would discourage Germany
from supporting any common European protection of deposits, a
proposal made to underpin confidence in the region’s lenders.
The ECB, which supervises Italian banks, and the EU
Commission, which rules on whether state support can be allowed,
have declined to comment on the Italian proposal, saying they
await a formal announcement from Rome.
NO HIDING PLACE
At home too the tactics in Rome – after more than six years
of procrastination through the country’s banking crisis – are
The government had hoped healthier Italian banks would club
together to help the lenders, Banca Popolare di Vicenza and
But most demurred, having already spent billions propping up
ailing banks, including through the government-sponsored Atlante
fund that pumped 3.4 billion euros into the Veneto banks and is
now set to be wiped out.
Others had problems of their own, such as Monte dei Paschi,
which is being bailed out by the state using another exception
to the EU rules. Most banks said the government should stop
asking them to chip in, and use instead the 20 billion euros it
set aside for bank rescues, negotiating terms with Brussels.
Opposition politicians have been critical.
“Intesa gets a free gift, the state takes on all the bad
stuff and the taxpayer pays,” said Renato Brunetta,
parliamentary leader for former prime minister Silvio
Berlusconi’s Forza Italia (Go Italy!) party, estimating the cost
for the Italian state could be 5-6 billion euros.
“Did we really need to take so much time to come up with
such a rubbish solution?”
Carla Ruocco, a prominent lawmaker of the 5-Star movement,
echoed this view: “By wasting years, the government put itself
in a bind.”
(Additional reporting by Gavin Jones in Rome and Francesco
Guarascio in Brussels; writing by John O’Donnell; editing by