Europe
2019.12.17 00:24 GMT+8

Italy approves $1bn rescue of Popolare di Bari bank

Updated 2019.12.17 00:37 GMT+8
By Matilda Barca

The troubles at Popolare di Bari bank have put Giuseppe Conte's government under pressure (Credit: Reuters)

Following two days of tension and uncertainty, the Italian government finally approved a 900 million euro ($1 billion) investment to save the cooperative bank Popolare di Bari from bankruptcy.

The government will put the money into state-owned Banca del Mezzogiorno-Mediocredito Centrale (MCC), which will then finance a capital increase at Popolare di Bari. About $557 million will be used immediately to quickly boost the financial strength of the southern bank, while the rest is being set aside for future requirements.

"Our objectives are to protect those who have put their money in this bank, strengthen the southern credit system or the south of Italy will not be able to move forward from this as it is already struggling, we will take the opportunity to relaunch this bank, which is an essential feature in the southern credit system," said Giuseppe Conte, the country's prime minister.

Market analysts have said Popolare di Bari's crisis is the result of a history of risky investments and loans. Following the 2008 financial crisis and its poor management, it ended up in the crosshairs of the Italian government. These issues came to a head in June 2019, when its half-yearly budgets were seriously below the accepted standards.

The problems at Popolare di Bari have also put pressure on Conte's fragile coalition between the anti-establishment Five Star Movement and the left-wing Democratic party. 

Hours before a cabinet meeting on Friday, Conte denied the need for state intervention to bail out Popolare di Bari, while leader of the opposition Matteo Salvini called for him to stand down as prime minister.

Luigi di Maio, the Five Star leader and deputy prime minister, on Saturday said he wanted to know why the Bank of Italy had allowed the southern bank's health to deteriorate so badly and which bank managers were responsible for the accumulation of all the bad loans.

"In no way we will protect the bankers, we can't admit that those who are responsible aren't held accountable," said Conte.

Italy has had to rescue several banks since 2016, such as Monte dei Paschi di Siena, Popolare di Vicenza and Veneto Banca.

Popolare di Bari's troubles have come at a time when Conte's government faces a series of economic issues including the fate of airline Alitalia and the troubled Ilva steel plant in the south of the country.

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