AN Italian financial expert predicted widespread social unrest and protests as the Italian government draws up plans to pay up £17bn in a massive bank bailout package
Italy faces months of discontent after the national government has been forced to step in to save the country's oldest bank from going under.
The vulnerable EU country – only recently thrown into disarray following a shock referendum result – will now face certain protests after the bailout bill for Monte dei Paschi amounts to more than £700 per family.
Italian Prime Minister Paolo Gentiloni, who has only been in office for a week, will be forced to prop up the major European bank with a £17bn bailout.
However, based on EU 'burden-sharing' rules, more than 40,000 small business owners in Italy will lose out in the rescue package.
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A last-ditch private rescue plan failed on Wednesday, triggering a massive 12 per cent collapse in shares.
Ferdinando Giugliano, a finance expert for Italian newspaper La Repubblica, told BBC's Today programme: “After the private rescue failed, there is only one option left - for the government to step in."
Mr Giugliano said the bailout will force losses onto around 40,000 retailers who invested without "really knowing the bank's insecurity".
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The financial expert said the aftermath of bailout will be "toxic" before adding: "It will not solve the Italian banking crisis because there are smaller banks which also need intervention.
"There will be a number of people who feel defrauded by this, who will feel they were misled in buying these bonds.
"Last year there was a similar situation when the government stepped and in that situation, there were 10,000 people who lost money.
"This time it's 40,000 people. There will be widespread discontent and protests. The government will come under huge pressure."
The Italian government has been in talks with Brussels on ways to structure the bailout in a way that compensates the 40,000 retail shareholders who will suffer losses based on new EU 'burden-sharing' rules.
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However, a backlash against a taxpayer-funded bailout of the weakest link among the EU banking institutions has already begun.
Codacons, a consumer lobby group, estimated the massive cash injection into the bank would cost each Italian family more than £700.
Ipek Ozkardeskaya, senior market analyst at London Capital Group, added: "Finding a solution to rescue Monte Paschi could trigger a short-term relief rally in the sector, yet the European banks will certainly remain on a slippery ground for a longer period of time."
