Everywhere in the world where you have unions involved with politics you have dodgy financing scandals. Only the wops would let a commie run a bank.
Italian magistrates investigating losses at Banca Monte dei Paschi say the mushrooming scandal has taken a dramatic turn, with political fallout that threatens to rock the countryâ€™s elections next month and upset eurozone plans for a banking union.
â€śThe situation is explosive,â€ť said Tito Salerno, head of the prosecuting team in Siena, describing the fast-moving events at Italyâ€™s third-largest bank as extremely grave.
The Milan bourse tumbled 3.4pc and yields on 10-year Italian bonds spiked 15 basis points to 4.31pc as the political scandal widened.
Monte dei Paschi (MPS), the worldâ€™s oldest bank dating back to 1472, is under investigation for covering up losses on derivatives and paying over the odds for its â‚¬9bn (ÂŁ7.8bn) purchase of Banca AntonVeneta in 2007. Italyâ€™s press alleges that the inquiry has unearthed a network of bribes and kickbacks, a claim denied by the bank.Â
The lender has lost â‚¬6.4bn since early 2011 and the damage is mounting. Italyâ€™s weekly news magazine Panorama reports MPS could face another â‚¬500m losses from its â€śChianti Classicoâ€ť venture into property loans, a claim also denied.
MPS has had to be rescued a third time, issuing a â‚¬4.5bn convertible bond at a 9pc interest rate. The stock price has crashed 95pc.
What makes the case so delicate are the bankâ€™s close ties to the Italian political Left. Right-wing critics claim it was a patronage machine for the Democratic Party (PD) of Luigi Bersani, current front-runner in Italyâ€™s close-fought elections.
MPS is 35pc-owned by a foundation that answers to the PD-controlled Tuscan province of Siena and was run by ex-Communist Giuseppe Mussari until his abrupt exit this month.