The 540-year-old Monte dei Paschi Bank, Italy’s third-largest, is on the ropes as it struggles to deal with holdings of Italian bonds, once considered a prudent place to tuck cash.
The euro crisis upset that calculation. Across Europe, banks are confronting the same problem as seemingly safe bets that governments would repay their debts turned out to have been major gambles.
At the heart of the crisis, the tangled relationship between governments and the financial sector amplifies the financial problems on both sides. And in Siena, bountiful profits that once poured from Monte dei Paschi’s treasure-filled Gothic palazzo have dried up. Last week, the bank announced that it had lost $2 billion in the first half of 2012.
Source and full story: Washington Post, 2 September 2012