Last updated: January 25, 2013 5:15 pm

MPS saga puts Italian officials in spotlight

MPS Siena©Reuters

Who knew what and when? Coming in the middle of an election campaign the finger pointing over the derivatives scandal unfolding at Monte dei Paschi di Siena promises to be particularly brutal.

No one escapes blame entirely. For the moment Mario Monti, the technocrat prime minister running for election, and the centre-left Democratic party which had intimate ties with Italy’s third-largest bank by assets are in the main line of fire, followed by the venerable Bank of Italy and Consob, the stock market regulator.

“They all knew. Or at least everyone should have known,” commented Renato Brunetta, the architect of Silvio Berlusconi’s economic agenda.

Mr Berlusconi’s centre-right party is hammering home that the amount raised through Mr Monti’s unpopular property tax is roughly equal to the €3.9bn his government is offering to Monte dei Paschi in rescue loans. That the loan includes €1.9bn to cover money already lent by Mr Berlusconi’s former government is glossed over.

Vittorio Grilli, finance minister, can expect tough questions when he appears before parliament’s finance commission on Tuesday, particularly on why the government did not disclose that it knew of problems at the bank when parliament voted to approve the loans last month.

As a former adviser to investment bank Goldman Sachs, Mr Monti is vulnerable to accusations that he is the man of the banks. Critics were quick to note that one of the candidates running for Mr Monti’s Civic Choice movement in Tuscany – the region around Siena – is Alfredo Monaci, a former Monte dei Paschi board member who is still president of a real estate company owned by the lender.

Clearly unhappy that the derivatives issue threatens to dominate the election campaign, Mr Monti on Friday turned the spotlight on the Democratic party, noting its longstanding political control over the charitable foundation that in better times acted as a cash-cow for Siena as the main shareholder in Monte dei Paschi.

Mr Monti said he was not attacking Pier Luigi Bersani – leader of the Democrats and a possible future partner in a coalition government – but the “historical phenomenon of the mix between banks and politics which must be uprooted as it is a bad beast”.

Mr Bersani’s claim that the “party does politics and doesn’t do banking” is being widely ridiculed. Rightwing newspapers reported that Giuseppe Mussari, chairman of the Tuscan bank at the time of the lossmaking derivatives deals, had donated €683,500 to the Democrats and their predecessors over 10 years.

Mr Mussari, who left Monte dei Paschi last April and resigned as head of the Italian banking association this week, has denied any wrongdoing over the derivatives deals.

Despite the furore, Roberto D’Alimonte, politics professor at Rome’s Luiss university, doubts the scandal has the potential to make a “dramatic” difference to the election outcome.

Two recent opinion polls – taken before the derivatives scandal broke – show the centre-left coalition still some 12 points ahead of Mr Berlusconi’s centre-right. The former prime minister says his own surveys reveal a gap of half that.

The wheels of justice turn slowly in Italy and it could be years until the truth emerges. The Bank of Italy has accused Monte dei Paschi of hiding documents over the derivatives deals. The central bank is co-operating with a judicial investigation and has defended its supervisory performance under Mario Draghi, who moved to the European Central Bank in 2011.

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