Monte dei Paschi's Defensive Bid Reshapes EU Banking Debate

Banca Monte dei Paschi di Siena, the world's oldest bank and a symbol of Italy's troubled public finances, has launched a €34 billion defensive counter-offensive to resist a takeover bid from rival Intesa Sanpaolo, according to a commentary published by Project Syndicate this week.

The Siena-based lender, founded in 1472 and rescued by Italian taxpayers in 2017, responded to Intesa's €30.6 billion offer on August 20 by launching share-exchange offers for Banco BPM and Banca Generali totalling roughly €34 billion, while also distributing €4 billion to its own shareholders.

The episode, as described by Lucrezia Reichlin, a professor at London Business School writing for Project Syndicate, reveals a deeper structural problem: EU policymakers have focused on forcing governments to surrender influence over national banking systems, rather than building a genuine European financing channel.

Reichlin's argument, published Tuesday, frames the Monte dei Paschi battle as a symptom of an incomplete European banking union. The commentary contends that the current approach — pressuring member states to privatise and reduce state sway over lenders — has not produced the cross-border consolidation that would make the eurozone's financial system more resilient.

For Italy, the stakes are particularly high. Monte dei Paschi's very existence is a product of state intervention: the bank was nationalised after a €5.4 billion bailout in 2017, making the Italian government its largest shareholder. The defensive bids, which target Banco BPM and Banca Generali, represent an aggressive attempt by a state-backed institution to grow its way out of vulnerability rather than submit to a private-sector rival.

The commentary, drawing on two decades of European banking data, suggests the Monte dei Paschi manoeuvre could become a template for other state-influenced lenders across the continent. Rather than a one-off defensive tactic, it argues, the episode demonstrates why the European Commission should pivot toward constructing a supranational financing mechanism that would reduce reliance on national champions.

The outcome of the bidding war remains uncertain. Intesa Sanpaolo has not publicly withdrawn its offer, and regulatory approval for Monte dei Paschi's counter-bids would require clearance from both Italian authorities and European competition watchdogs. What is clear, according to Reichlin, is that the episode has exposed the limits of the current integration model — one that has left Italy's banking system fragmented and exposed to sovereign risk.