Italy

Brussels and Italy have agreed on a rescue of Monte dei Paschi di Siena bank, outlining a draft plan that involves significant cost cuts, some investors taking a hit and executives facing a cap on pay, the Financial Times reported. The announcement brings the long-running saga over the future of Italy’s oldest lender towards a close, with Rome signing off on an investor bail-in and the kind of deep restructuring MPS fiercely resisted for more than a year.

Level, the new budget airline from IAG SA, may start flying across the Atlantic from Rome in the latest bid by a low-cost carrier to capitalize on Alitalia SpA’s insolvency, Bloomberg News reported. Level, which will lift its fleet of two Airbus SE A330 jets to five in 2018, will initially focus its expansion on Italy and France, IAG Chief Executive Officer Willie Walsh told reporters ahead of Level’s inaugural flight on Thursday. Rival Norwegian Air Shuttle ASA this week said it’s adding U.S. routes from Rome as bankruptcy proceedings force Alitalia to scale back.

Italy’s troubled banks may suffer an additional 10 billion euros ($11 billion) in losses from the sale of their bad loans at current market prices, said Ignazio Visco, Bank of Italy governor and ECB governing council member. “If they were sold at the very low prices offered by the few large specialist debt collection agencies active in the market today, which pursue very high returns, the amount of additional writedowns would be in the order of 10 billion euros,” Visco said on Wednesday at the central bank’s annual meeting in Rome, Bloomberg News reported.

Italian government debt is under-performing its eurozone rivals this morning as investors hone in on the prospect of earlier than expected elections in the bloc’s third largest economy, the Financial Times reported. Italy’s 10-year debt yield, a measure of the government’s borrowing costs, has gained over 2 basis points (0.02 percentage points) this morning to hit 2.2 per cent – a two week high – after former PM Matteo Renzi raised the prospect of an autumn vote. Yields fall when prices rise.

Monte dei Paschi di Siena said on Monday it was in exclusive talks with a domestic fund and a group of investors over the sale of its bad loan portfolio, which it needs to offload before it can be taken over by the state, the International New York Times reported on a Reuters story. The negotiations mark the latest stage in a long-running process to rescue the world's oldest bank, which includes efforts to enable it to shed its bad loans.

Italy’s troubled mid-sized lenders Banca Popolare di Vicenza and Veneto Banca have “all the public guarantees necessary” to shore up their liquidity, Italy’s finance ministry said in a statement on Thursday. Pier Carlo Padoan, finance minister, made the statement after meeting with the bosses of struggling banks Banca Popolare di Vicenza and Veneto Banca on Thursday morning, the Financial Times reported. Both lenders are at risk of being bailed in under EU rules.

Italy’s plan for an 8.8 billion-euro ($9.8 billion) bailout of Banca Monte dei Paschi di Siena SpA faces resistance from the European Central Bank, which is concerned the lender may struggle to maintain capital buffers as it tries to get back on its feet, according to people with knowledge of the matter.

Italian regional lenders Popolare di Vicenza and Veneto Banca may need to raise capital privately to cover loan losses to win European Union approval for a state bailout they have requested, six sources familiar with the matter said on Wednesday. The two banks, together with fellow bailout candidate Monte dei Paschi di Siena, are stuck in rescue talks with European authorities that are keen to limit the amount of taxpayer money used to help ailing lenders in accordance with new EU rules on banking crises, the International New York Times reported on a Reuters story.

Since Emmanuel Macron’s victory in the French presidential election removed fears of a chaotic “Frexit”, many pessimists have turned to Italy as the next likely cause of problems for investors in Europe. So far, however, investors don’t seem to be listening, the Financial Times reported. The FTSE MIB – Italy’s benchmark stock index – has been the best performer among major European stock indices since the first round of the French vote last month, climbing more than 10 per cent. That’s well ahead of even France itself, where the CAC has risen only 6.9 per cent.

Air France-KLM has ruled out stepping in to save near-bankrupt Alitalia, with its chief executive telling shareholders on Tuesday that its past experience of cross-shareholdings and a failed merger plan would discourage it from investing directly in Italy again, Reuters reported. In 2008 Air France-KLM walked away from a planned takeover of Alitalia after talks with the Italian carrier's unions broke down. Earlier this month Alitalia went into administration for the second time in less than a decade after workers rejected a restructuring plan.