Banca Monte dei Paschi di Siena will sound out foreign investors in London over the next few days to raise support for a hefty 2.5 billion euro (2.11 billion pounds) capital increase that the troubled Italian bank must complete next year. UBS, which is advising the Tuscan lender on the much-needed cash call, is to lead the round of contacts that will in any case be preliminary, a financial source told Reuters on Wednesday.

Italian Prime Minister Enrico Letta reshaped the country’s two-year commitment to austerity by approving a labor-tax cut and relying on 3.5 billion euros ($4.7 billion) of spending reductions to meet 2014 deficit targets, Bloomberg reported. The central government will bear 2.5 billion euros of the expense cuts and regional administrations will deliver 1 billion euros, Letta said in a press conference in Rome after his cabinet approved next year’s budget yesterday. The labor-tax cut will give an extra 1.5 billion euros to workers next year and a total of 5 billion euros through 2016, he said.

Shareholders in the Alitalia airline have agreed to a 300 million-euro ($400 million) capital increase to save Italy's flagship carrier from bankruptcy, the Associated Press reported. It is still unclear which shareholders will contribute. The airline said in a statement Tuesday that the 21 Italian shareholders and Air France-KLM, the largest stakeholder, have 30 days to decide whether to exercise their options to contribute money and increase their stakes. The capital increase can already count on 75 million euros from Italy's postal service and a 100-million-euro bridge loan.

A leading European airline group denounced Italian plans to rescue Alitalia as illegal on Monday, as shareholders were due to vote on a capital increase to keep the near-bankrupt carrier flying, Reuters reported. International Airlines Group, which owns British Airways and Spain's Iberia, urged the European Commission to intervene over the Italian government's attempts to stitch together a bailout for Alitalia.

Alitalia, the Italian national airline that has made a profit only a few times in its 67-year history, once again risks collapsing as the government scrambles to find investors willing to rescue its problem child, Reuters reported. Rome offered a financial lifeline to Alitalia through the state-owned post office, but the plan depends on private shareholders ploughing more money into what many investors regard as a corporate lost cause.

For people in the airline industry, there’s a certain financial deja vu around Italian flag carrier Alitalia. The pattern plays like this: When the airline runs into a cash crunch, government officials, investors, and employees howl, a rescue package is assembled, and the company lives to fly another day. Fast-forward three or four years and repeat the cycle, Bloomberg reported. That’s where the company is as it heads into Thursday’s shareholder meeting, by which time Italy’s leaders are expected to have decided what measures are needed to keep the airline from collapsing.

Loss-making Italian airline Alitalia risks having to file for bankruptcy if it fails to agree a deal for a capital increase in the next couple of weeks, a government source said on Tuesday. Alitalia needs about 500 million euros ($680 million) to stay in business and invest in a new turnaround strategy, analysts have said, after accumulating losses of more than 1 billion euros and debt of a similar size since being rescued from bankruptcy in 2009.

Italian lender Banca Monte dei Paschi di Siena BMPS.MI +6.26% SpA approved on Monday the guidelines of a tougher restructuring plan aimed at obtaining the European Commission's green light on a state loan it received in February, and at restoring profitability by 2017, The Wall Street Journal reported. The new plan, which amends a set of targets and actions launched in June 2012, contains more drastic measures which the bank hopes will also enable it to reimburse €3 billion ($4 billion), or about 70%, of the state loan by 2014.

Telecom Italia's new chief executive Marco Patuano will unveil a business plan outlining the future of its South American units and a possible corporate restructuring in Italy at a board meeting on November 7, trade union officials said, Reuters reported. Patuano told a meeting with unions on Friday the heavily indebted former phone monopoly had put on hold a plan to spin off its fixed-line network because the right regulatory conditions were not in place, they said in a joint statement.

Franco Bernabè resigned as chief executive of Telecom Italia on Thursday after he clashed with some of the European telecommunications company’s major investors, the International Herald Tribune reported. Mr. Bernabè, 65, had led the struggling Italian telecommunications firm since 2007, but his tenure had been clouded by the European financial crisis that severely hit the company’s domestic market.