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Italy seeks approval for possible banks rescue funding

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A view of a Monte Dei Paschi di Siena bank branch in Milan (AP)

A view of a Monte Dei Paschi di Siena bank branch in Milan (AP)

A view of a Monte Dei Paschi di Siena bank branch in Milan (AP)

Italy's new government is asking parliament to approve up to an additional 20 billion euro (£16.7 billion) in funding to rescue the country's troubled banks, if necessary.

The cabinet approved the measure late on Monday, as Italy's third-largest lender, Monte dei Paschi di Siena, is seeking to raise five billion euro (£4.2 billion) in the markets to stay afloat.

Investors signalled their doubts about the operation, with its share price dropping by 11% before the government's announcement.

Parliament must vote before the new funding can be allocated.

Concern that Monte dei Paschi may need a state bailout before year-end comes amid broad concerns about Italy's banking system, which is weighed down by some 360 billion euro (£302 billion) in bad loans which banks will struggle to repay due to the weak economy.

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