UPDATE 1-Italy Senate panel blocks changes to Monte Paschi aid
ROME Dec 4 (Reuters) - An Italian parliamentary panel on Tuesday rejected a government proposal to change the terms of state loans for Banca Monte dei Paschi di Siena, plunging a bailout scheme for the country's third biggest lender into confusion.
Under the government proposal, Monte dei Paschi, the world's oldest bank, would have been able to pay interest on 3.9 billion euros of state loans with a mix of cash, shares issued at market value and other financial instruments.
The proposal was intended to make it less likely that the state would have to take a stake in the lender.
However, the Senate budget committee unexpectedly rejected the proposal. A senator in the centre-right PDL party told Reuters the government was now likely to try to re-introduce the amendment in a separate bill.
At issue is whether the Treasury will be forced to take a stake in Monte dei Paschi. The bank, founded in 1472, had to request state aid because it failed to meet tougher capital requirements set by the European Banking Authority.
The government agreed to lend up to 3.9 billion euros to the Tuscan bank back in June, but the scheme has been on hold for months as Italy negotiated with the European Commission on the terms of the deal.
The Rome government proposed changes to the terms of the bailout after Brussels demanded that any new shares issued by the bank to the Treasury be valued at market prices.
That would have given the Treasury a stake of around 7 percent in the bank if, as expected, the lender ends 2012 with a net loss. (Reporting by Paolo Biondi; Editing by Leslie Gevirtz)
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