FRANKFURT European Central Bank policymaker Jens Weidmann said plans for a state bailout of Italian bank Monte dei Paschi di Siena (BMPS.MI) should be weighed carefully as many questions remain to be answered, according to German newspaper Bild.
“For the measures planned by the Italian government the bank has to be financially healthy at its core. The money cannot be used to cover losses that are already expected,” Bild quoted Weidmann as saying in a summary of an article due to be published on Tuesday.
He said there must be a risk of severe economic turbulence, adding: “All this must be carefully examined.”
The Italian government approved a decree on Friday to bail out Monte dei Paschi after the world’s oldest bank failed to win investor backing for a desperately needed capital increase.
Monte dei Paschi emerged as the weakest of some 51 European banks subjected to stress tests earlier this year by the ECB. It was given until the end of the year to sort out its problems or face being wound down.
Since the 2007-09 financial crisis, the European Union has adopted rules that make state aid a last resort when it comes to helping troubled banks.
“These (rules) are meant especially to protect taxpayers and put responsibility on investors. State funds are only intended as a last resort, and that is why the bar is set high,” Weidmann, the hawkish president of Germany’s Bundesbank, told Bild.
(Reporting by Maria Sheahan; editing by David Clarke)