The banking controversy at the heart of an election

Among the most pressing themes in the public debate is the acquisition of the Monte dei Paschi Di Siena bank (MPS) – by the commercial bank Unicredit, both of whom have Italian headquarters. The controversy around this acquisition has important political implications.

The Ministry of Economy and Finance holds 68.25 per cent of the bank’s total shares, perhaps the highest control of any company or institution under the State’s wing. Having been private up to 2017, it was taken into the public sphere quite recently. This last outcome had been a panacea, albeit for a limited time span, for MPS. The bank has been historically closely linked with the Left. A hypothesis of selling MPS to Unicredit was already at stake during the second Conte government, with the endorsement, at that time, of Gualtieri, the Minister of Economy.

After having been utterly mismanaged in the last decade, MPS is now at a crucial stage, struggling not to collapse, with the European Union imposing strict deadlines to meet and noticeable constraints. There are several issues to be faced by the government related to the financial operation involving the two banks and the MEF, most notably: the situation with MPS employees and the political implications with particular reference to the election in Siena.

Draghi might worry about the thousands of potential harms caused to MPS employees as a result of the acquisition by Unicredit. Many parties are fearing this threat. In Tuscany, the coordinator of FI (Forza Italia) Massimo Mallegni stated the need of safeguarding the MPS brand and employment levels, after unions and local institutions were excluded from bargaining with the government. He was echoed by the governor of the region as well, Eugenio Giani, invoking the involvement of the municipality of Siena and speaking on behalf of Italia Viva. In response to this, the Minister of Economy Daniele Franco stated his willingness to close the deal in 40 days. He recently spoke in favour of the acquisition in front of the two Chambers. In his speech, Franco clearly described the current market condition of MPS as worrying.

The operation is positively regarded for many reasons, firstly the fact that Unicredit has been the only entity showing an interest in MPS. Furthermore, it averted the possibility of having a so called “spezzatino” – the main argument brought forward by Lega – given that, having Unicredit been targeting the company branch of the core banking system of MPS, there are no possible routes leading to the dissolution of the bank itself.

Furthermore, MPS surviving as an autonomous subject would expose it to risks, uncertainties and serious competitiveness issues. In fact, the capital needed to expand the scope of MPS and making it rebound from the current crisis is far greater than the 2.5 billion euros expected in the current 2021-2025 capital plan. So far, MPS is not pushing for a capital expansion. Therefore, the best solution for MPS would be of a structural kind, with Unicredit coming into play and dragging the already-weakened bank to a recovery.

Concerning the main complaints by most parties, Franco has ensured that the government would put its best effort in protecting MPS’ more than 21 thousand employees, with focus on protecting the MPS brand and on Tuscany as well.

As far as the political side is concerned, the elections to choose senators and deputies in the single-member constituencies are coming, and in Siena the PD (Democrat Party) candidate is Enrico Letta, current coordinator of the party itself. PD finds itself in a delicate position, as the city is so closely linked with MPS. An acquisition by Unicredit would be deleterious in terms of consensus. Many PD members are pushing for the operation to being prevented. As a matter of fact, it would be a clear sign of the mismanagement of the party, given the MPS-PD relationship, in the eye of voters. On the other side, the Centre-Right coalition is claiming an inherent conflict of interest in the operation, as the current President of Unicredit, Pier Carlo Padoan, is also a PD member. It is unfortunate for them to have to be forced to deal with this in-house situation just at the beginning of Letta’s electoral campaign.

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