ROME — The Italian government on Sunday made 5.2 billion euros ($5.8 billion) of resources immediately available to keep operative two banks that the European Central Bank has deemed "failing or about to fail," sending them into insolvency procedures.
Premier Paolo Gentiloni defended the swift action by the government as vital for ensuring Italy's slow economic recovery isn't derailed by a "disorderly" failure of Veneto Banca and Banca Popolare di Vicenza.
The two banks are based in the northeast Veneto region, one of Italy's most economically productive. They serve many of the small and medium-sized businesses that are the backbone of the nation's economy.
Economy Minister Pier Carlo Padoan assured Italians that on Monday "there will be normal operations at the teller windows" when the two banks reopen their doors after the weekend.
The European Central Bank on Friday night pulled the plug on the two troubled banks, which have struggled with high levels of outstanding loans.
The resources approved by the government will facilitate, as widely anticipated, Italian bank Intesa Sanpaolo's taking on the "good" assets of the two banks.
Gentiloni said the government's move at an ad hoc Cabinet meeting Sunday afternoon was mainly aimed at saving "account-holders, savers, of these two banks, in favor of those who work in these banks, and in general in favor of the economy of the territory, one of our most important."
He also deemed the help vital "for the good health of our banking system," which is seen elsewhere in Europe as a weak point in Italy's economy.
Banks that can't issue loans hamper Italy's businesses from bouncing back, and also pose vulnerability to the eurozone economy as a whole.
Padoan told reporters that the overall price tag for the rescue operation would eventually be nearly 17 billion euros ($20 billion) because it would include Italian government "guarantees" for 12 billion (some $13.5 billion).
He defended the government actions as "burden-sharing, not a bail-in," saying "all this is in full respect of EU rules."
"The government has utilized European rules in the best possible way," Padoan said.
Padoan also insisted there would be no impact on public finances.
With the government taking on the so-called "bad assets" of the two banks, some of the costs might be recouped eventually, Padoan noted.
He added that small account holders and "senior share holders" would see their funds "100 percent repaid."