Italy has used a controversial state guarantee to rush through the rescue of four banks before EU “bail-in” rules come into force next year in an effort to deal with tens of billions of bad loans hampering the country’s economic recovery, the Financial Times reported. The newly created Italian bank resolution fund will raise €3.6bn to restructure four small lenders — Banca Marche, CariFerrari, CariChieti and Banca Etruria.

Italy sold two-year debt at a negative yield for the first time on Tuesday, as concerns over the health of the global economy and expectations of further central bank stimulus reignited a rally in bond markets, the Financial Times reported. The sale gains Italy entry to a select group of countries including Germany, France and Switzerland whose borrowing rates have turned negative as investors prove willing to buy their debt at any price. “This is an Alice in Wonderland situation,” said Andrew Milligan, head of global strategy at Standard Life Investments.

Poor access to credit has been — and remains — one of the biggest clouds hanging over the tepid recovery in Italy’s economy, which has just started to grow this year after three years of stagnation and recession, the Financial Times reported. Small and medium-sized companies, which form the backbone of the Italian economy, were hit the hardest as banks retrenched in the wake of the economic and financial crisis that left them saddled with high volumes of non-performing loans (NPLs).

The Bank of Italy will keep mid-sized lender Banca Marche in special administration until mid-December - two months more than previously planned, a source close to the matter said on Tuesday, Reuters reported. The country's central bank put Banca Marche in special administration in August 2013 after an audit led to massive writedowns on its loan portfolio and eroded its capital base. Its period in special administration has already been extended from 2014 until this autumn.

Two former chief executives of Alitalia and three other former managers were given hefty jail terms on Monday over wrongdoing connected to the airline's bankruptcy in 2008, Reuters reported. A Rome court sentenced Giancarlo Cimoli, who ran the company from 2004 to 2007, to eight years and eight months for culpable bankruptcy and market-rigging, while his predecessor Francesco Mengozzi got a five-year sentence. After the 2008 bankruptcy a series of managers failed to turn the company around, despite the sale of a 25 percent stake to Air France KLM in 2009.

Italy is working on a plan to recapitalise three small lenders under special administration by raising cash through a fund financed by healthy banks, a financial source told Reuters on Friday. The banks are Cassa di Risparmio di Ferrara (Carife), Banca Marche and Banca Popolare dell'Etruria e del Lazio, all of which were placed under special administration by the Bank of Italy because of serious capital shortfalls.

Reports of suspicious bank transactions in Italy jumped 10 per cent to a record high last year as the pervasive problems of organised crime, corruption and tax evasion were exacerbated by a three-year economic slump, the central bank said on Monday, the Irish Times reported. The financial downturn had given cash-rich mafia groups the opportunity to tighten their grip on the economy as, with banks reducing lending, the criminal networks boosted their investments in the real economy, investigators have said.

Italian bonds halted a two-day drop and the nation sold €6.8 billion of debt, a sign of investor confidence that fallout from Greece’s financial crisis can be contained, the Irish Times reported. Italy’s sale included €2.9 billion of 10-year bonds and €1.5 billionof five-year securities. While the bid-to- cover ratio, a gauge of investor demand, was the lowest since December for the longer-maturity bonds, it increased for the shorter-dated notes.

Banca Marche, which was put under special administration in 2013, said on Thursday it had repaid 1.8 billion euros ($2.01 billion) it owed to Credito Fondiario, Reuters reported. The unlisted lender said some of its senior bonds and other securities that were guaranteeing the loan obtained by Credito Fondiario have been sold on the market. The sale has allowed Banca Marche to repay the loan to Credito Fondiario and also to pocket some money, the lender said without giving details.

All European eyes will be anxiously turned to Greece in the coming days, but Italian eyes are turned more anxiously than most, The Wall Street Journal reported.