The Italian government and UniCredit have ended talks over the sale of Banca Monte dei Paschi di Siena (MPS).

As per media reports, the talks ended because UniCredit and the government could not reach an agreement related to the capital injection in ailing MPS and its businesses.

UniCredit demanded that it needed around €7bn to cover MPS’ capital buffer.

“Despite the effort from both sides, UniCredit and the Ministry of Economy and Finance (MEF) announce that the negotiations pertaining to the potential acquisition of a defined perimeter of Banca Monte Dei Paschi di Siena will no longer continue,” the parties said in a joint statement.

UniCredit began discussions with the Italian government for the deal in July 2021.

The deal was expected to support UniCredit’s growth plans as well as bolster its position in Italy.

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In August 2021, MPS emerged as the worst performer in European Union-wide stress tests.

The test found that the entire capital of MPS will be wiped out under a severe economic downturn.

One of the oldest banks in the world, MPS was bailed out by the government in 2017 and currently owns around 64% stake in the struggling lender.

As per the EU’s demands, the Italian government must find a solution for MPS by the end of 2021. It will now seek an extension of deadlines from the EU, Reuters reported citing a treasury official.

“European authorities are fully aware that we have seriously tried to conclude a transaction at market terms within the end of the year, and that this has not been possible, because the proposal we have received is not acceptable,” Reuters quoted the official as saying.