It all started over the weekend after a warning from European authorities that two struggling Italian  banks — Banca Popolare di Vicenza and Veneto Banca — were facing collapse.

It’s just the latest action by Italy to plug a hole in its dicey financial industry. At the end of last year, it had to promise billions of euros as a bail out for Monte dei Paschi, the oldest operating bank in the world.

Under the plan announced Sunday, the Italian government will issue out€4.8 billion ($5.4 billion) in cash and provide as much as €12 billion ($13.4 billion) in guarantees so that Intesa Sanpaolo one of the country’s biggest banks, can take over the best parts of the two regional banks. The remaining activities will be wound down.

The country economy has barely developed for decades while the banks are struggling with the country’s stunted economy.


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