Italy to push ahead with Monte dei Paschi sale under Draghi - source

By Giuseppe Fonte and Valentina Za

ROME (Reuters) - Italian Prime Minister Mario Draghi's new government aims to deal with problem bank Monte dei Paschi by pushing ahead with plans to re-privatise the loss-making lender, a source close to the matter said.

Rome spent 5.4 billion euros ($6.6 billion) in 2017 to rescue the Tuscan bank, leaving the state with a 64% stake. MPS now needs another 2.5 billion euros to rebuild its capital reserves.

A sale would stop MPS from becoming a permanent drain on taxpayers and would allow Italy to meet its commitments to the European Union undertaken at the time of the bailout.

With Italy's change of government, there was speculation that Draghi, a former European Central Bank chief, could use his cachet with European authorities to buy more time and delay an MPS sale.

But a source briefed on the government's plans said both Draghi and Economy Minister Daniele Franco intend to keep up efforts to seal a merger deal for MPS with a stronger rival.

The prime minister's office declined to comment.

Finding a buyer for MPS has proved tough despite generous incentives lined up by the Treasury to sweeten a deal.

Italy had been negotiating a sale of MPS to UniCredit but a change at the helm of Italy's second biggest bank has stalled talks.

UniCredit's new CEO Andrea Orcel, who starts his job after mid-April, may prefer other options in Italy's consolidating banking sector, sources have said.

With the prospect of a sale fading in the immediate future, MPS' auditors have expressed concerns about the bank's financial future, three people familiar with the matter said.

MPS is working to ensure the auditors sign off on its accounts, a formality required for a board meeting on Thursday, the people said.

MPS declined to comment.

Annual losses at the Tuscan bank soared by more than 60% to 1.7 billion euros last year.

(Reporting by Giuseppe Fonte in Rome and Valentina Za in Milan. Editing by Jane Merriman)