Long-suffering Monte dei Paschi di Siena bank in Italy, is on the brink of collapse yet again after talks with UniCredit collapsed. 

The Tuscan bank, which is the oldest in the world in continuous operation, was rescued by a government bail out in 2017. It was hoped UniCredit, one of Europe's largest commercial and investment banks, would take the lender off the hands of the Italian taxpayer. 

Italian daily newspaper Corriere della Sera reported the deal fell through because the pan-European institution wanted $8.13 billion from the government as a sweetener on the arrangement. The government had committed to a cash injection of $2.9 billion but according to reports was unwilling to meet UniCredit's demands.

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But the failure puts the Italian government in a tricky situation, as European Union rules state a private buyer must be found by the end of 2021. It is understood that Italy's Prime Minister Mario Draghi will apply to Brussels for an extension, to convince UniCredit to return to talks. 

Scandal and mismanagement have followed Monte dei Paschi since it bought the Antonveneta bank - before realizing it paid twice its market value. The 2008 global financial crisis and following Eurozone debt crisis did not help the Siena-based institution. 

It was rescued by the Rome government in 2017 for a sum of $6.2 billion. Economist Lorenzo Codogno, a former Finance Minister, said he was "surprised" at the news of talks breaking down, and predicted the two sides will gather around the negotiating table again soon. 

"Both (the government and UniCredit) will eventually have to sit back down and find a solution," he explained.