ECB Calls Italy’s Bluff, Rejects Monte Paschi Request For More Time To Raise Capital

Friday, December 9, 2016
By Paul Martin

by Tyler Durden
ZeroHedge.com
Dec 9, 2016

Earlier this week, we reported that according to the FT, a suddenly empowered Rome was demanding that the ECB give it more time to rescue Italy’s Monte Paschi show private bailout effort has effectively failed. What is surprising is that Italy was “preparing to blame the bank for losses imposed on bondholders if Rome is forced into an urgent state bailout”, a negotiating tactic we dubbed at the time blackmail.

The board of MPS, which has the Italian Treasury as its largest shareholder, was asking the supervisory arm of the European Central Bank to give it until mid-January to pull off a €5bn equity injection and try to avoid forcing losses on some debtholders as required under new EU bailout rules. And this is where the blackmail came in: cited by the FT, a person involved in the negotiations warned that “If they don’t give the extension, the ECB must take responsibility. They will be pushing the button. We are only asking for five more weeks.”

According to Reuters, as of moments ago the ECB has called Italy’s bluff, and the central bank “has rejected a request by ailing Italian lender Monte dei Paschi di Siena for more time to raise capital, a source said on Friday, in a move that piles pressure on the Italian government to bail out the bank.”

The ECB’s supervisory board turned down the request at a meeting on Friday on the grounds that a delay would be of little use and that it was time for Rome to step in, the source said.

The Rest…HERE

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