Elimination of two Italian banks, which could cost billions of euros in Rome, on Monday provoked sharp criticism for departing from the principles designed to strengthen confidence in the euro area in the event of bankruptcy of creditors.
As lawmakers analyzed the details of the rescue of the two banks, the burden of which would fall mainly on the state, rather than on investors, many criticized the Italian authorities for failing to follow the mechanism known as the Banking Union and the European Commission for Allowed Rome to do it.
As part of the agreement concluded on the weekend, Italy will pay 5 billion euros and give guarantees of up to 12 billion euros to the largest retail bank of the country Intesa Sanpaolo so that it can absorb the collapsed Popolare di Vicenza and Veneto Banca.
This violated the principle agreed by the European leaders and reflected in the legislation of the European Union, which provides that, in the event of bankruptcy of creditors, the costs should be borne by investors, not by the state.
"Everything was in vain," said Philipp Lamberts, a member of the European Parliament from the Green Party, who for several months participated in the negotiations and drafted the text of the law adopted in 2016.
"Today is an unfortunate day for Europe, which is another blow to European integration," he added, also describing what happened as a "serious blow" in the currency of the eurozone, which harms the reputation of the European Central Bank, which controls the largest creditors in Europe.
Sven Gigold, another member of the European Parliament, who also helped draft the text of the law, demanded an audit of the neglect of the rules, criticizing the European Commission that approved the scheme.
Investors breathed a sigh of relief after the decision of the Italian authorities, and the shares rose, while Rome tried to present this step in a positive light.
The decision of the Italian authorities helped solve one of the main financial problems facing the country. An official of the Bank of Italy even said that the state can ultimately profit from the transaction.
However, European legislators are less optimistic.
European Parliament deputy Marcus Ferber said that Italy violated the new rules, suggesting that after that Germany will not seek to strengthen ties within the eurozone.
"This will kill the banking union," he said, "which makes further integration ineffective."
Germany, which feared that it would have to bear costs in the event of the bankruptcy of creditors of countries such as Greece or Spain, played a major role in developing rules that shift the burden on bondholders and large investors of similar banks.
"The use of state aid should be avoided as long as possible in cases of bankruptcy," said German Finance Minister Wolfgang Schaeuble, adding that the European Commission should monitor compliance with these rules.
Italy's actions, bypassing EU rules, raise questions about the whole mechanism of the banking union and whether it can be used instead of saving money from taxpayers.
Recent events also cast a shadow on the ECB, which monitored the activities of Banca Popolare di Vicenza and Veneto Banca and until recently considered them solvent. The central bank declined to comment.
The decision of Italy contrasts with the recent rescue of the biggest bank of the country Santander troubled creditor Banco Popular. Santander paid only 1 euro for absorption, but took on troubled loans of the bank that was on the verge of collapse, while the burden of the costs fell on shareholders, including retail investors.
"Intesa Sanpaolo will be able to benefit from the scheme, which was deprived of Banco Santander," said Alberto Ruiz Ojeda, a lawyer representing investors to Banco Popular.
"We observe discriminatory and unjust actions, which will provoke new lawsuits, both from shareholders and from holders of the bonds Popular."