Sunday

21st Jul 2019

Monti and Draghi under fire in Italian bank scandal

  • Monte Paschi is the oldest bank in the world, founded in 1472. (Photo: Chad Palomino)

A bank scandal has flared up in Italy one month ahead of elections, with questions raised about European Central Bamk (ECB) chief Mario Draghi's role in overlooking the case and PM Mario Monti using taxpayer money to bail out the bank.

Banca Monte dei Paschi di Siena, the world's oldest bank and Italy's third largest lender, is facing over €700 million in losses after its new management found hidden financial transactions gone bad dating back to 2006-2009, which had been kept secret from regulators.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

Monti, who is seeking a second mandate as Prime Minister next month, is now being accused by his rival Silvio Berlusconi of having levied extra taxes only to save a rotten institution.

Monte dei Paschi got a first bailout during Berlusconi's term as Prime Minister but filed for more government aid of €500 milllion last year, bringing the total cost of the rescue to €3.9 billion.

One of the hidden deals was with Deutsche Bank and was called "Project Santorini." It provided Monte Paschi with a €1.5 billion loan designed to cover losses from an older trade with the German bank. Bloomberg news agency saw documents indicating Deutsche Bank made €60 million in profit out of the situation.

The German bank was itslef convicted of fraud last month in a separate case on selling bad financial products to the city of Milan.

Speaking in Davos on Thursday (24 January), Monti said the bailout will be delayed pending a further review of the Monte Paschi's accounts.

"The subscriptions of those financial tools hasn't happened yet, among other reasons because the needed conditions for the operation to be completed haven't been met yet," he told a press conference.

He dismissed the accusations of him levying taxes to save the bank as "complete fantasy."

The bank has also complained that politicians are "exploiting" the situation.

Draghi in the firing line

Mario Draghi has also come under fire because he was at the time chairing Italy's central bank which was in charge of supervising trades, such as the Monte Paschi transactions.

Former economy minister Giulio Tremonti tweeted on Wednesday that it is "stupefying" that Draghi failed to discover or prevent the dodgy dealings.

Italy's acting economy minister Vittorio Grilli also told press on Thursday the responsibility lies with the Draghu-era Bank of Italy, not with the current government.

"It wasn't us that did the controlling. On the checks, all I will say is that it is the responsibility of the Bank of Italy," he said.

Meanwhile, Berlusconi's centre-right party is trying to drag the centre-left opposition - the pollsters' favourite to win the upcoming elections - into the mud.

The bank, founded in 1472, has its headquarters in the Tuscany region controlled by the center-left PD party.

"Monte Paschi is close to collapse. This is an example of how the left would govern the country," said Angelino Alfano, one of Berlusconi's deputies.

For his part, Beppe Grillo, a comedian who runs the populist Five Star Movement - polled to become the third biggest party in parliament - is also trying to capitalise on the affair.

"I don't see why we should give almost €4 billion in public money to cover up a bunch of thieves," he told Reuters on Wednesday.

Grillo, who owns shares in Monte Paschi, said he will participate in a shareholders' meeting on Friday and ask for the bank to be nationalised.

EU hesitates to back France over US tariff threat

France has passed a new tax on tech companies that will affect US global giants like Facebook. Donald Trump has threatened retaliatory tariffs over it. The EU commission says it will "coordinate closely with French" on the next steps.

EU banks more vulnerable to shocks than feared

Eurozone banks, such as Deutsche Bank, might be much more vulnerable to a repeat of the 2008 financial crisis than EU "stress-tests" have said, according to a new audit.

Feature

Romania enlists priests to promote euro switchover plan

Romania is due to join the single currency in 2024 - despite currently only meeting one of the four criteria. Now the government in Bucharest is enlisting an unlikely ally to promote the euro to the public: the clergy.

Trump and Kurz: not best friends, after all

The visit of Austrian chancellor Sebastian Kurz to the White House on Wednesday showed that the current rift in transatlantic relations is deepening by the day.

Stakeholders' Highlights

  1. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  2. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues
  3. Nordic Council of MinistersNo evidence that social media are harmful to young people
  4. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021
  5. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  6. Nordic Council of MinistersEducation gets refugees into work
  7. Counter BalanceSign the petition to help reform the EU’s Bank
  8. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  9. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  10. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  11. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  12. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North

Latest News

  1. EU goes on holiday as new UK PM arrives This WEEK
  2. Survey: Half of EU staff 'don't know' ethics rules
  3. Von der Leyen signals soft touch on migrants, rule of law
  4. Timmermans: von der Leyen will be tough on rule of law
  5. Timmermans trolls 'idiot' Brexit negotiators
  6. Rudderless Europe: Will real Germany please stand up?
  7. PiS & Fidesz claim credit for von der Leyen victory
  8. Von der Leyen faces gender battle for commission posts

Join EUobserver

Support quality EU news

Join us