Monte dei Paschi seals deal with unions over job cuts

Italian state-owned bank Monte dei Paschi di Siena (BMPS.MI) said it had reached an accord with unions to shed thousands of jobs, as it works towards commitments to cut costs agreed this week with the European Commission.

The deal will see 3,500 Monte dei Paschi (MPS) employees who are within seven years of their pension age leave by Nov. 30 through a generous early retirement scheme, used by lenders in Italy and financed by the individual banks.

Staff who take the package will receive 80% of their net pay for up to the seven years, Italy’s biggest banking union FABI said in a separate statement. The percentage rises to 85% if they earn less than 2,850 euros a month.

Those who sign up will also retain healthcare benefits and continue to have access to the favourable loan terms reserved for employees during the period, FABI added.

MPS had just over 21,000 staff at the end of last year.

The costly accord inflates the bill for Italian taxpayers who in 2017 spent 5.4 billion euros ($5.5 billion) to rescue MPS and are now set to shoulder nearly two thirds of a new 2.5 billion euro cash call.

Raising the rest of the money from investors after the summer is expected to prove a challenge for CEO Luigi Lovaglio given difficult markets.

MPS, which is 64% owned by the state, has said it would use roughly a third of the proceeds to fund the staff departures.

FABI said unions would meet in future with MPS to agree new hiring to replace 50% of the cuts over the course of a business plan through 2026.

Lovaglio, who took over at MPS in February, unveiled the new plan in June, after the Treasury last year failed to clinch a sale of MPS to UniCredit (CRDI.MI) and had to secure an extension of the re-privatisation deadline from the EU.

The latest accord with Brussels, with the extended deadline and new restructuring goals, was announced on Tuesday, ahead of Lovaglio’s first set of financial results on Friday.

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