Banca Monte dei Paschi is a 'huge problem', Italy's League says

CERNOBBIO, Italy Sept 5 (Reuters) - Italy's Banca Monte dei Paschi (BMPS.MI) is a "huge problem", the head of the right-wing League party said on Sunday, voicing concerns over a potential sale of the Tuscan bank to bigger rival UniCredit (CRDI.MI).

Having taken control of Monte dei Paschi (MPS) in 2017 after a 5.4 billion euro ($6.3 billion) bailout, the Italian Treasury has committed to returning the world's oldest bank to private hands by mid-2022, with Rome now trying to broker a merger with UniCredit.

"The solution could be a merger, but not a sell off to UniCredit," the League's Matteo Salvini told reporters on the sidelines of an annual business conference in Cernobbio on Lake Como.

The Treasury should take time and push for a tie-up with Italian banks that are focused on lending to small and medium-sized enterprises instead of rushing to sell it to UniCredit, Salvini said.

"MPS and other local banks could create a third banking group," Salvini said, hinting at a potential tie-up with Banca Carige (CRGI.MI) and other regional lenders in southern Italy.

The leader of the League party, which is part of the governing coalition, said a tie-up between UniCredit and MPS could trigger 7,000 job cuts and the closure of 300 branches.

MPS last month posted better than expected second-quarter results but said it still planned to raise 2.5 billion euros in cash next year if it failed to secure a buyer.

Salvini said it would make sense for the Treasury to inject additional funds into MPS if it needed to put the bank back on the market in the medium term.

The bank's home town of Siena, like the rest of the central region of Tuscany, is a traditional bastion of the centre-left PD party, which has often been criticised for contributing to the Tuscan lender's troubles.

Salvini repeated his previous harsh criticism of PD and said the party should take responsibility for the lender's woes.

Reporting by Francesca Landini Editing by David Goodman

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