* Italy bailed out Monte Paschi di Siena in 2017

* Rome sold a 12.5% stake on Tuesday, now holds 26.7%

* Minister says pledge to Brussels was to cede control

ROME, March 27 (Reuters) - Italy has broadly met re-privatisation commitments agreed with Brussels over bailed-out bank Monte dei Paschi di Siena (MPS) after the market placement of a 12.5% stake, Economy Minister Giancarlo Giorgetti said on Wednesday.

The Treasury sold the stake on Tuesday through an accelerated bookbuilding procedure (ABB), pocketing 650 million euro ($703 million).

The transaction will reduce Rome's stake to 26.7% from 39.2%.

Commitments Italy made to European Union competition authorities at the time of the MPS bailout in 2017 bind it to eventually putting the lender back into private hands.

Addressing lawmakers, Giorgetti said the agreement with the European Commission referred to ceding control of the bank, suggesting that it does not have to sell all its shares.

"There is a specific commitment made to the European Commission on MPS regarding the divestment of control by the state," he said during a parliamentary hearing.

Asked by reporters at the end of the event what residual stake in MPS the state could maintain while still complying with the requirement to relinquish control, Giorgetti replied: "We are there."

The European Commission was not immediately available for comment.

After rescuing MPS at a cost of 5.4 billion euros for taxpayers in 2017, Rome pumped another 1.6 billion into the Tuscan bank in November 2022, when it covered 64% of a 2.5 billion euro make-or-break capital raise.

The sum raised by Tuesday's share sale, when added to the market placement of an initial 25% stake last year that garnered 920 million euros, roughly matches what the state spent on the latest capital increase.

A first attempt to privatise the bank in 2021 proved fruitless as Italy's No.2 bank UniCredit walked away from merger talks with the Treasury, forcing Rome to seek more time from the EU.

Since they took office in late 2022, both Giorgetti and Prime Minister Giorgia Meloni have repeatedly said that the government would try to boost competition among banks with the privatisation of MPS, signalling a preference for a merger with another mid-sized lender.

This raised the prospect of a potential deal with Banco BPM or BPER Banca, Italy's third and fourth largest banks respectively, though both have said they are not interested in MPS.

Given the absence of interested buyers in the short term, share placements became the only way for the Treasury to cut its stake and work towards re-privatisation commitments, Reuters first reported last May.

The opposition Democratic Party on Wednesday asked Giorgetti to clarify whether Rome intends to continue to seek a merger partner for MPS. ($1 = 0.9245 euros) (Reporting by Giuseppe Fonte, editing by Gavin Jones and Keith Weir)