September 2, 2012
SIENA, Italy — Tucked away in this Tuscan city, the oldest bank in the world has survived the Borgias, pestilence and too many wars to count. Now, a mundane foe has proved far more dangerous: Italian government debt.
The 540-year-old Monte dei Paschi Bank, Italy’s third-largest, is on the ropes as it struggles to deal with holdings of Italian bonds, once considered a prudent place to tuck cash.
The euro crisis upset that calculation. Across Europe, banks are confronting the same problem as seemingly safe bets that governments would repay their debts turned out to have been major gambles.