Friday

10th Jul 2020

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 20 years of archives. 14-day free trial.

... or subscribe 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 forecasts deeper recession, amid recovery funds row

The economies of France, Italy and Spain will contract more then 10-percent this year, according to the latest forecast by the EU executive, as it urges member state governments to strike a deal on the budget and recovery package.

EU plans tougher checks on foreign takeovers

The EU and its member countries are worried that foreign powers, such as China and its state-owned companies will take advantage of the economic downturn and buy up European firms

Vestager hits back at Lufthansa bailout criticism

Commission vice-president in charge of competition Margarethe Vestager argued that companies getting large capital injections from the state during the corona crisis still have to offset their competitive advantage.

News in Brief

  1. Citizens' perception of judicial independence drops
  2. Irish finance minister voted in as eurogroup president
  3. Italy's League party opens office near old communist HQ
  4. 'Significant divergences' remain in Brexit talks
  5. Germany identifies 32,000 right-wing extremists
  6. WHO to hold probe of global Covid-19 response
  7. China accuses Australia of 'gross interference' on Hong Kong
  8. EU to let Croatia, Bulgaria take first step to join euro

EU forecasts deeper recession, amid recovery funds row

The economies of France, Italy and Spain will contract more then 10-percent this year, according to the latest forecast by the EU executive, as it urges member state governments to strike a deal on the budget and recovery package.

Stakeholders' Highlights

  1. UNESDANext generation Europe should be green and circular
  2. Nordic Council of MinistersNEW REPORT: Eight in ten people are concerned about climate change
  3. UNESDAHow reducing sugar and calories in soft drinks makes the healthier choice the easy choice
  4. Nordic Council of MinistersGreen energy to power Nordic start after Covid-19
  5. European Sustainable Energy WeekThis year’s EU Sustainable Energy Week (EUSEW) will be held digitally!
  6. Nordic Council of MinistersNordic states are fighting to protect gender equality during corona crisis

Latest News

  1. Border pre-screening centres part of new EU migration pact
  2. EU 'failed to protect bees and pollinators', report finds
  3. MEPs give green light to road transport sector reform
  4. If EU wants rule of law in China, it must help 'dissident' lawyers
  5. Five ideas to reshape 'Conference on Future of Europe'
  6. EU boosts pledges to relocate minors from Greece
  7. Hydrogen strategy criticised for relying on fossil fuel gas
  8. Merkel urges EU unity to hold off economic fallout and populism

Join EUobserver

Support quality EU news

Join us