Italy

Top shareholder Air France-KLM refused a plea for cash on Thursday to rescue Alitalia, saying a new business plan was not enough to save the stricken Italian carrier unless its creditors also write off some of its huge debts, Reuters reported. Alitalia, which was privatised in 2008, has been unprofitable for more than a decade and has been stuck in a months-long tussle with Air France-KLM over whether to keep their strategic and financial partnership alive.

Italian banks are still struggling with rising levels of bad loans, with smaller banks lagging in setting aside money to cover potential losses on them, even as the Bank of Italy urges a more aggressive cleanup on the financial institutions’ balance sheets ahead of a European health check next year, The Wall Street Journal reported. Third-quarter results of Italy’s banks reflect the pain they are still experiencing as Italy’s economy struggles to revive after two years of recession.

Italy’s appointment of a former senior IMF official as the government’s new spending tsar has already added to the budget deficit – his annual salary of €300,000 is the maximum allowed for a civil servant.

Officials from cash-strapped Italian flagship carrier Alitalia SpA. will travel to Moscow next week to sound out Aeroflot's about an alliance, a person close to Alitalia said on Saturday, The Wall Street Journal reported. The person, who spoke on condition of anonymity, confirmed local news reports about the visit but didn't elaborate. Aeroflot wasn't immediately available for comment. Alitalia is looking for partners and Italian Transport Minister Maurizio Lupi said the government will consider others apart from Air France-KLM, AF.FR -3.80% which has a 25% stake in the carrier.

Air France-KLM, the French-Dutch airline, said Thursday that it had written off the entire value of its 25 percent holding in its partner Alitalia, raising doubts that it will take part in a plan to inject 300 million euros into the struggling Italian flag carrier, The International New York Times reported.

Italy's minister of economic development, Flavio Zanonato, defended the record of Prime Minister Enrico Letta's government, pushing back at critics who say the young administration hasn't been ambitious enough in tackling Italy's myriad economic problems and has sent the wrong signal to foreign investors by pumping more money into near-bankrupt Alitalia, The Wall Street Journal reported. Mr. Zanonato also said the government will launch a series of measures aimed at helping foreign companies invest in Italy, raising the number of startups and freeing more credit for small companies.

Siena, the medieval city renowned for its Palio horse races, is home to the world’s oldest bank. Within its aging walls lies a distinctly 21st century tale of devastation wrought by local politicians and global financiers, Bloomberg reported. Banca Monte dei Paschi di Siena SpA, Italy’s third-largest lender, is struggling to survive as it seeks to repay a second bailout or face nationalization. Its downfall proved a boon to global investment banks. They offered merger and investment advice to executives beholden to politicians that helped wipe out 93 percent of Monte Paschi’s value.

Alitalia's main pilots' union has announced a four-hour strike for Oct. 29 to pressure management for details on how they intend to return the struggling carrier to health, the Associated Press reported. UILT secretary-general Marco Veneziano said in a statement the union could hold more strikes - up to a combined total of 48 hours - until it receives `'a credible plan" for saving Italy's flagship airline. The union rejects proposals for layoffs and demands a clear plan that includes an international partner and new management.

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.