December 19, 2016 / 6:33 PM / 7 months ago

UPDATE 1-Italy cabinet to ready paperwork for debt hike to save banks -govt sources

1 Min Read

(Adds parliament will have to give green light to debt hike)

ROME, Dec 19 (Reuters) - Italy's cabinet will meet on Monday to prepare the way for any eventual increase to the national debt to cover the cost of saving Monte dei Paschi di Siena and other ailing banks, government sources said.

Monte dei Paschi has launched a 5-billion-euro ($5.2 billion) capital increase and must raise the money by the end of the year or face being wound down. If it cannot find takers in the private sector, the government will be forced to step in.

Sources told Reuters last week that the government was ready to pump 15 billion euros -- just under one percentage point of gross domestic product -- into Monte dei Paschi and other ailing banks.

Before it can do that, the cabinet needs parliamentary authorisation to lift national debt levels.

On Monday, ministers are due to approve the eventual request, sources said. There was no word on when it might call on parliament to give it the green light.

Reporting by Giuseppe Fonte and Francesca Piscioneri; Writing by Crispian Balmer

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