UPDATE 1-ECB funding to Italy banks tops 200 bln eur in Dec

* ECB funding rises to 209.995 bln eur from 153.2 bln eur
* ECB held first ever 3-yr liquidity tender in Dec.
* Longer-term ECB funds to Italy banks more than doubled

(Adds details)
MILAN, Jan 9 (Reuters) - Funding from the European
Central Bank to Italian lenders rose sharply to nearly 210
billion euros in December as banks in the country took advantage
of an unprecedented offer of longer term ECB funds, data from
the Bank of Italy showed on Monday.
Reliance on ECB funding for Italian lenders has risen
sharply since the end of June, when total borrowing stood at
41.3 billion euros, mirroring growing funding strains caused by
the euro zone sovereign debt crisis.
The ECB injected 489 billion euros at its first-ever tender
of three-year funds on Dec. 21. Italian banks took 116 billion
euros, securing nearly 24 percent of the total, three sources
told Reuters in December.
The Bank of Italy data showed that domestic banks held 160.6
billion euros in longer-term ECB funds at the end of December,
more than double the 68.4 billion euros of a month earlier.
By contrast, Italian lenders lowered their participation to
the ECB's main refinancing operations in December, with total
funding from the seven-day tenders falling just below 50 billion
euros from 83.4 billion euros at the end of the previous month.
At the end of November total ECB funding to Italian banks
stood at 153.2 billion euros.

Fears that European banks will struggle to raise capital to
withstand the spreading debt crisis have intensified since
Unicredit priced a rights offer at a deep discount
last week. The Italian bank's shares have since lost 37 percent
of their value and trading in rights to buy into the bank's
closely watched cash call have been suspended.
Domestic banks are predicted to be the main buyers of debt
Italy is expected sell at an auction later this week, details of
which are due to be announced on Tuesday.
The Treasury will also give details later on Monday of a
planned sale of shorter-dated t-bills.
Yields on Italian 10-year bonds have risen above the 7
percent level regarded as unsustainable for public finances, and
the country's debt offers hefty returns for banks borrowing at
ultra-low rates from the ECB.
Italy's debt sale and a Spanish auction on Thursday will
provide 2012's first major test of investors' willingness to
plough more money into the euro zone's troubled sovereigns.
Both countries are struggling to convince investors they can
raise enough cash to repay a mountain of debt due in 2012
despite low growth, weak public finances and downgrade threats.

(Reporting by Valentina Za; Graphic by Scott Barber; Editing by
Catherine Evans)