Italy: Rise and fall of the world’s oldest bank
25 January 2013
Founded in 1472, the bank Monte dei Paschi di Siena has helped raise Siena's quality of life and governance to the top tier. The political and economic scandal that has erupted around the “MPS”, however, could mark the end of a system – and of an era.
“Siena is in the red, and with shame,” remarks a keen observer of Siena affairs sitting outside a café, responding to the latest news of abysmal losses by the bank. The mood of the city today, it must be said, has been captured for almost seven hundred years in the cycle of frescoes by Ambrogio Lorenzetti hanging on the walls of the Palazzo pubblico, today's City Hall: the Effects of Good and Bad Government, which shows the city of the Sienese ruined and the countryside abandoned, should it ever suffer the ills of “bad government.”
Roberto Barzanti, grand old man of the local left and Communist Party (PCI) Mayor when Monte Paschi celebrated the 500th anniversary of its founding, attributes the ills of today to the “Sienese superstition” that the embrace between the bank and local political life would never be dissolved. “The transformation, in 1995, of the old institution of public law into a joint stock company was felt more painfully here than anywhere else,” said the former MEP.
“The Sienese have struggled to accept the split between the philanthropic activities of the ‘Monte’ and those of the bank proper, which should have been achieved by the creating, on the one hand, of a foundation, and on the other, of a publicly traded bank. When that finally did go through, things did certainly change – but everything has been tried to make sure that nothing really changes.”
Milking the cash cow
From that was born the “harmonious tangle”, these indissoluble links between the old Christian Democrats and the old Communist Party, the Church and Freemasonry, trade unionists and the bankers.
Appointments to the bank were decided at the meetings of the parties, and appointments to the town hall were decided at the bank. For the past 25 years, all the mayors of Siena have begun their careers at the Monte dei Paschi, except the last, Franco Ceccuzzi, who stayed in office just over a year and was also ushered out of it by the “Monte” crisis. The locals call the bank “Father Monte”, shrewd tongues the “milk cow”, and everyone tries to ensure that, when they pass by it, the bank does not deprive them of a little milk.
There used to a lot of milk, and for everyone: from 1995 to 2010, the Foundation handed out nearly €2bn “in the territory” for roads, heritage restorations, sports facilities, and for associations and their volunteers. All this was according to a fixed pay-out scheme, so that no one, whatever their political colour, could really have much to complain about.
Everything takes a tumble
The game was up a year ago, when the Foundation discovered that it was headed for a cliff edge. And from there, everything took a tumble. The local Democratic Party [inheritor of the PCI] fell apart during the budget presentation, when part of the mayor's coalition challenged the distribution of grants awarded by the Foundation and refused a vote of confidence in the (now former) mayor, Franco Ceccuzzi.
While the local political scene is being ripped apart by the debris of the “Siena system”, which is today in tatters, civil society is questioning its own future. The austerity imposed by the red ink in the accounts has led recently to drastic cuts in funding and sponsorships.
The first to pay the price has been the Siena Calcio football club, whose grants have been rudely cut, according to leaks, from €4m to €2m, and the basketball team, Mens Sana, the great passion of the Sienese, which has seen its grant slashed from €12m to €4m. But that's not all. Subsidies for the famous palio have been squeezed from €250,000 to less than €15,000 for each contrada [neighbourhood] competing. It may seem a minor thing, but it has a strong symbolic value.
“Paradoxically, the end of the era of largesse could have at least one silver lining,” blogs the “Heretic of Siena”, a valued and much-followed commentator on life in the city. “Everyone has to grasp now that an era is over, and for good.”