Friday

18th Jan 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 bleeding untold billions to fraud

Over €6bn of EU taxpayers' money was stolen by criminals in recent years and over €130m is still being lost each year, EU auditors said.

ECB takes over ailing Italian bank

Decades of mismanagement appear to have caught up with Italy's Carige bank as the European Central Bank takes control in a move to stave off another banking crisis.

Analysis

China's 2019 growth outlook

As China's growth seems to be slowing, some observers see the country amid what the New York Times called a "severe downturn". As they mistake China's secular deceleration with cyclical fluctuations, they miss the rapid increase in Chinese living standards.

News in Brief

  1. Another referendum 'would take a year', Downing St says
  2. 82-year old Berlusconi to run in EU elections
  3. EU parliament votes to triple funds for democracy promotion
  4. EU parliament backs linking budget payments to rule of law
  5. Verhofstadt voted for Draghi amendment 'by mistake'
  6. 'Plan B' Brexit vote in UK parliament set for 29 January
  7. Verhofstadt wanted Draghi out of G30 group
  8. Putin heads to Serbia amid warnings against West

Stakeholders' Highlights

  1. International Partnership For Human RightsKyrgyz authorities have to immediately release human rights defender Azimjon Askarov
  2. Nordic Council of MinistersSeminar on disability and user involvement
  3. Nordic Council of MinistersInternational appetite for Nordic food policies
  4. Nordic Council of MinistersNew Nordic Innovation House in Hong Kong
  5. Nordic Council of MinistersNordic Region has chance to become world leader when it comes to start-ups
  6. Nordic Council of MinistersTheresa May: “We will not be turning our backs on the Nordic region”
  7. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit
  8. International Partnership for Human RightsRaising key human rights concerns during visit of Turkmenistan's foreign minister
  9. Nordic Council of MinistersState of the Nordic Region presented in Brussels
  10. Nordic Council of MinistersThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  11. Nordic Council of MinistersThe Nordic gender effect goes international
  12. Nordic Council of MinistersPaula Lehtomaki from Finland elected as the Council's first female Secretary General

Latest News

  1. Brexit delay 'reasonable', as May tries cross-party talks
  2. MEPs allow Draghi's membership of secretive bank group
  3. EU parliament backs Morocco deal despite row
  4. Barnier open to 'future relations' talks if UK red lines shift
  5. German spies to monitor far-right AfD party
  6. On Morocco, will the EU ignore its own court?
  7. UK parliament rejects May's Brexit deal in historic defeat
  8. EU suggests majority vote on digital tax by 2025

Join EUobserver

Support quality EU news

Join us