Italian Finance Minister Daniele Franco defended the potential sale of troubled lender Banca Monte dei Paschi di Siena S.p.A. (BIT:BMPS) to UniCredit S.p.A. (BIT:UCG), as the process to sell the troubled lender gained momentum. Addressing lawmakers on August 04, 2021 evening, Franco confirmed UniCredit recently entered Paschi's data room, and the bank now has 40 days to examine its books. That period could be extended, he said, adding that this is the only deal under review and that he sees no viable options for securing the bank without a combination with a strategic partner.

Following a deal, Italy may own a stake in UniCredit, Franco said. “Since last autumn, the Treasury started to look for a possible partner for Paschi,” Franco said. “There is no ground to start a dialog with the EU over a plan to keep it stand-alone, but there are no elements to suggest Paschi will be broken up”.

While Monte Paschi predicts EUR 2.5 billion ($3 billion) in fresh capital will be needed if a takeover doesn't materialize, Franco has warned that without a merger the shortfall would be far higher. Stress tests conducted last week highlighted that the world's oldest bank needs “a large-scale structural strengthening,” Franco said. Lawmakers from all the main parties in Draghi's coalition are questioning the deal's price tag, with the government on the hook for as much as €10 billion based on conditions set by UniCredit, according to people familiar with the matter.

Political leaders have also raised concerns on possible job cuts and the potential loss of a prestigious historic brand. While Franco said the government is prioritizing protecting the bank's workers, he warned that redundancies could be much more than the 2,500 outlined in the bank's plan. A deal with UniCredit could require about 6,000 job cuts, mostly in Tuscany, according to people familiar with the matter.

The announcement of new negotiations between Rome and UniCredit has stirred controversy among politicians.