Brussels contacts Italy over MPS scandal

Bailout subject to OK for restructuring plan

Brussels contacts Italy over MPS scandal

Brussels, January 25 - The European Commission is in contact with the Italian authorities over the unfolding derivatives scandal at the country's third-biggest bank Monte dei Paschi di Siena (MPS), a spokesman said Friday. In December the commission gave provisional backing to a 3.9 billion euro recapitalisation package for the historic bank ''to preserve the stability of the Italian financial system,'' said a Brussels spokesman. However it made definitive approval of the bailout subject to the presentation by MPS of a restructuring plan within the first half of this year. The world's oldest bank came under fire earlier in the week after it emerged that 720 million euros had been lost in two derivatives deals with Japanese bank Nomura and the German Deutsche Bank that the Italian credit institution said it only recently discovered. The scandal spurred criticism from ex-premier Silvio Berlusconi, leader of the centre-right coalition's election campaign, of political interference in its running. MPS, through its foundation, has historically been linked to the centre-left Democratic Party (PD), which has long been dominant in Siena and the rest of Tuscany. Outgoing technocrat Premier and election condender Mario Monti also vowed to ''root out'' the ''ugly beast'' of ''mingling banking and politics''. Italy's central bank has also been dragged into the fray on charges of lack of banking supervision. However Bank of Italy Governor Governor Ignazio Visco has denied the claims, saying MPS was a "stable" bank.

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