Monte Paschi Provides Fodder for Berlusconi Attacks on Rivals

Revelations that Banca Monte Paschi hid details of structured finance deals that may produce hundreds of millions of euros in losses is embroiling everyone from Italian Prime Minister Mario Monti to European Central Bank President Mario Draghi, while providing fodder for Silvio Berlusconi to slam his rivals in attacks that are fueling his comeback in the polls ahead of elections on Feb. 24-25.

The acknowledgement by the bank last month that former management hid documents from the Bank of Italy — at the time headed by Draghi — that may have shed light on the murky deals brought back shades of Parmalat. The Italian dairy company caused Europe’s biggest bankruptcy in 2003 after it concealed a 14 billion-euro shortfall from investors.

Berlusconi and his allies have seized on the Paschi revelations to attack Monti, whose government is due to extend a 3.9 billion-euro rescue to the bank this month, as well as front-runner Democratic Party Pier Luigi Bersani for his local party’s ties to Monte Paschi.

Berlusconi’s camp has linked the Paschi aid plan to a reviled property tax imposed by Monti, saying the government is taxing homes to bailout the banks. The three-time premier also refers to Paschi as the Democratic Party’s bank, because the local chapter holds sway over the banking foundation that is Paschi’s biggest shareholder and the driving force behind the lender.

While the revenue from Monti’s property tax has nothing to do with loans to Monte Paschi, the association seems to be working for Berlusconi, according to the first polls released since the case exploded last week –even though Monte Paschi will initially pay taxpayers 9 percent possibly rising to 15 percent over the life of the loans.

Berlusconi’s bloc gained slightly in an Ipsos poll released Jan. 29 to 26.8 percent from 26.5 percent a week earlier, while his rivals lost ground by a bigger margin: Bersani’s forces slipped by almost a point to 37.6 percent from 38.5 percent and Monti’s bloc dropped to 15.4 percent from 16 percent. In an EMG poll released the previous day, support for Berlusconi’s People of Liberty Party rose one percentage point to 20 percent, the highest level of the campaign, as Bersani’s lead narrowed to 8.8 percentage points.

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