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Monte dei Paschi di Siena Admits $985 Million in Losses From Secret Deals

February 6, 2013 by Leave a Comment

FRANKFURT — Monte dei Paschi di Siena, an ancient Tuscan bank whose troubles have shaken Italian politics and caused jitters around the euro zone, on Wednesday confirmed earlier estimates of losses from a series of secret transactions that were used to conceal the scope of the bank’s problems.

The bank said its losses from three questionable transactions were 730 million euros (about $985 million), only slightly higher than an estimate in October of a loss of 720 million euros. The disclosure Wednesday, after a meeting of the bank’s board that lasted into the evening, could calm financial markets if investors conclude that all of the bank’s skeletons are out of the closet.

The disclosure came as Italian prosecutors said on Wednesday they had ordered the seizure of assets worth about 40 million euros in connection with possible fraud against Monte dei Paschi, Reuters reported. Prosecutors did not give details, but Italian news organizations reported that the money was seized from other banks that did business with Monte dei Paschi.

Problems at Monte dei Paschi, founded in 1472 and commonly known as M.P.S., have rippled far beyond the medieval Tuscan city of Siena, which is also the bank’s largest shareholder.

Former Prime Minister Silvio Berlusconi has seized on the scandal as an issue as he tries to make a political comeback.

The timing of the scandal has been inopportune for Mario Draghi, the president of the European Central Bank, raising questions about his supervision of Italian banks when he was governor of the Bank of Italy, the Italian central bank.

The Bank of Italy has insisted that it subjected M.P.S. to intense scrutiny. Last week the central bank issued a detailed account of the numerous steps it took since 2008 to force Monte dei Paschi to raise capital, install new management and deal with risks stemming from its holdings of Italian bonds, which were declining in value.

Some managers withheld critical information about the questionable trades that came to light only recently, the Bank of Italy said.

But at the least the case of Monte dei Paschi has illustrated the limits of bank supervision, and called into question whether the central bank would be able to do a better job than national supervisors at keeping an eye on banks.

Mr. Draghi is likely to face many questions about Monti dei Paschi when the central bank holds its regular monthly news conference on Thursday.

The problems at M.P.S., which led to a 3.9 billion euro ($5.3 billion) bailout by the Italian government, have also led to criminal investigations.

Prosecutors in Siena on Wednesday heard testimony from Antonio Vigni, former chief executive of Monte dei Paschi and one of several previous managers being investigated on a series of charges including false accounting and fraud. Giuseppe Mussari, the bank’s former president, will also be heard this week.

The bank’s troubles stem in part from the 9 billion euro ($12 billion) purchase of Antonveneta bank in 2008, just months after the Spanish bank Santander had bought it for 6.6 billion euros ($8.1 billion). The Siena magistrates are also looking into allegations of bribery related to that deal.

Investigations have branched out to other Italian cities, including Trani, in Sicily, where prosecutors are looking closely at derivatives operations carried out by Monte dei Paschi and other Italian banks as well as the role of the regulatory bodies entrusted with monitoring those banks.

Jack Ewing reported from Frankfurt and Elisabetta Povoledo from Rome.

Article source: http://www.nytimes.com/2013/02/07/business/global/monte-dei-paschi-di-siena-admits-985-million-in-losses-from-secret-deals.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

Berlusconi Both Drew and Divided Italians

November 13, 2011 by Leave a Comment

And polarized it. “No one had ever so divided Italy and Italians,” wrote Massimo Gramellini, a columnist for the Turin daily newspaper La Stampa.

His resignation on Saturday after 17 years as the paramount figure in Italian politics, just over half of them as prime minister, does not erase his presence from the political stage. He still has a powerful political party, now fighting for its future, and owns Italy’s largest private broadcaster. But it marks the symbolic end of an era in which the media baron held the country under his spell.

A businessman who built a real estate and media empire, Mr. Berlusconi was first elected in 1994, casting himself as a modernizer and promising Italy a season of free-market reform. But after a career barely dented by colorful sex scandals and multiple corruption trials, it was the market that finally drove him from office, when Europe’s debt crisis hit Italy.

From the start, Mr. Berlusconi entwined his fate with Italy’s. By personalizing Italian politics and turning himself into a brand — self-made, virile and wily — he transformed Italy’s political and institutional cultures in ways that will resonate for years.

In recent years, it was the sex scandals that most dominated the headlines, as reports emerged from judicial investigations of tawdry parties at the prime minister’s private homes involving scores of young women and even a prostitute who went by the stage name Ruby Heartstealer. (He faces charges of paying for sex with a minor, although they both deny the sex, and abusing his office by helping release her from police custody when she was arrested for theft.)

“He legitimized and made normal a kind of behavior, a style of illegality that in other countries would not even be tolerated in small doses,” said Paolo Flores d’Arcais, a philosopher and editor of the left-wing monthly magazine MicroMega. “And he inverted everything so that those who criticized him were considered moralists. It’s the world turned upside down.”

Mr. Berlusconi entered politics in the wake of a bribery scandal that had brought down Italy’s postwar political order, where for decades a centrist Catholic party was pitted against Westernized Communists. In a 1994 televised address, unprecedented in Italy’s staid political culture, he promised a new world, and invited Italians to join him.

“I have decided to enter the playing field and to take up politics because I don’t want to live in country that is not free, governed by immature political forces and by men who are bound hand and foot to a past that was both a political and economic failure,” he said.

Alexander Stille, the author of a book on Mr. Berlusconi called “The Sack of Rome,” said he represented something new. “The old political parties, the Christian Democratic Party and the Communist Party, represented broad ideologies and their leaders were comparatively unimportant,” he said. “Berlusconi, already a celebrity, offered himself: no real ideology other than his own personal wealth.”

It was a brilliant strategy, and it catapulted him into power. But his first term lasted only eight months, crashing when he lost a coalition ally. Mr. Berlusconi led the opposition for the rest of the 1990s, when a series of technocratic and center-left governments brought Italy into the single European currency.

He was elected again in 2001, after delivering a magazine-sized volume, “An Italian Story,” to every doorstep in Italy. A masterpiece of self-branding, it depicted him as a self-made businessman, a family man and a ladies’ man. With a dash of populism, it listed his horoscope (a Libra, “he is a communicative person capable of strong passion and deep love”) and showcased his love of soccer. He had named his party Forza Italia, or “Go, Italy,” after a soccer cheer.

Italians admired his image of wealth and sexual prowess. “The average Italian saw himself as Berlusconi, only poorer,” wrote Mr. Gramellini, the columnist.

That image was cemented into Italy’s psyche, and rarely challenged, in the media he controlled. His broadcasting company, Mediaset, shook up Italian television starting in the 1980s by importing flashy American soap operas and dramas and producing new programs featuring scantily-clad dancing girls, draining audiences from the staid state broadcaster.

Gaia Pianigiani contributed reporting.

Article source: http://www.nytimes.com/2011/11/13/world/europe/berlusconi-both-drew-and-divided-italians.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Berlusconi Resigns After Italy’s Parliament Approves Austerity Measures

November 13, 2011 by Leave a Comment

His exit, a sudden fall after months of political stalemate, paves the way for a new government of technocrats led by Mario Monti, a former member of the European Commission. Mr. Monti is likely to be installed in the next few days, following the apparent consent of key blocs of Mr. Berlusconi’s center-right coalition.

His resignation came just days after the fall of Prime Minister George A. Papandreou in Greece. Both men were swept away amid a larger crisis that has threatened the entire European Union, in which roiling financial markets have upended traditional democratic processes.

Though it was met by cheering crowds in Rome, the end of Mr. Berlusconi’s 17-year chapter in Italian politics, characterized by his defiance and fortitude, sets off a jarring political transition. “This is the most dramatic moment of our recent history,” Ferruccio de Bortoli, the editor of the Milan daily newspaper Corriere della Sera, said Saturday.

After borrowing rates on Italian bonds soared last week to levels that have required other euro zone countries to seek bailouts, Mr. Berlusconi pledged to step down after the Italian Parliament approved austerity measures sought by the European Union.

The lower house gave their final approval to some of the measures on Saturday afternoon, and two hours later, he officially submitted his resignation to President Giorgio Napolitano.

An impromptu orchestra and choir gathered outside the presidential palace, where Mr. Berlusconi resigned, playing the “Hallelujah” chorus from Handel’s “Messiah.”

Hundreds of spectators gathered outside, shouting “buffoon” and “go home” to a polarizing leader once loved by many, making Mr. Berlusconi the very embodiment of the Italian saying that the tenor is applauded until he is booed off stage. Some in the crowd were popping bottles of champagne. And cars and mopeds in downtown Rome waved Italian flags and honked their horns in celebration, as they do when the national soccer team wins.

Fulvia Roscini, 47, a nurse, had brought her 8-year-old son and 13-year-old daughter outside the prime minister’s office on Saturday evening. “We came here because I wanted my kids to see this,” she said, “to see that another country is possible and is already here.”

As he left his residence on Saturday before resigning, Mr. Berlusconi waved to crowds of supporters, but he left the presidential palace through a secondary exit, to avoid the crowds.

Mr. Berlusconi did not speak publicly after resigning. But the ANSA news agency quoted him telling aides that the jeering “is something that deeply saddens me.”

In a statement, Mr. Napolitano, who as head of state will oversee the transition, said he would hold consultations with party leaders to nominate a new prime minister on Sunday.

In this case, the discussions will likely be a formality. For days, Mr. Monti, 68, a well-respected economist with close ties to European Union officials, has been identified as the front-runner.

Mr. Monti met on Saturday with Mr. Berlusconi and earlier in the day with Mario Draghi, the recently installed president of the European Central Bank, reinforcing the notion that financial and European institutions supported Mr. Monti’s appointment.

The mandate of the next government will be to push through measures to help reduce Italy’s $2.6 trillion public debt and increase growth to keep the country competitive.

The austerity measures approved by lawmakers include selling state assets and increasing the retirement age to 67 from 65 by 2026. They would also decrease the power of professional guilds, privatize municipal services and offer tax breaks to companies that hire young workers.

Key political parties, with the exception of the Northern League, an important member of Mr. Berlusconi’s center-right coalition, have said they will support Mr. Monti.

But the wrangling over crucial details is not over. Italy’s political parties are fighting to maintain their positions in future political constellations and to ensure their re-electability after passing unpopular measures demanded by tough economic times.

Some members of Mr. Berlusconi’s coalition want early elections to form a new government with a new mandate. But the main opposition party and other lawmakers, fearing that elections would lead to an unsustainable period of market turmoil, support a transitional government.

The prospect of early elections diminished on Saturday, however, when Mr. Berlusconi’s party said in a statement that it would support a Monti government. But they added that they awaited the “names of the cabinet members, the program of the new government and the timing of the mandate.”

The events in Greece and Italy this month raised concerns across the Italian political spectrum about the growing power of financial markets to shake governments. In Italy and elsewhere, a dysfunctional political class has been “impotent” in the face of market dynamics and their impact on people’s lives, the commentator Luigi La Spina wrote Saturday in the Turin daily newspaper La Stampa.

The atmosphere in downtown Rome on Saturday evening was one of celebration mixed with uncertainty.

“I know that the crisis won’t be over just because he leaves, and I’m a bit concerned about what will happen with the markets, but I know that this country will be better without him,” said Isabella La Monica, a retiree, who was waiting in front of the prime minister’s residence. “Things can’t get any worse.”

Gaia Pianigiani contributed reporting.

Article source: http://www.nytimes.com/2011/11/13/world/europe/silvio-berlusconi-resign-italy-austerity-measures.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,