Padoan defends Italy's use of taxpayers' money to wind up two banks

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BERLIN, June 29 (Reuters) - Finance Minister Pier Carlo Padoan on Thursday defended Italy's closure of two failed regional banks using public funds, saying the costs pale in comparison with the large sums that Germany and Britain pumped into their banks after the financial crisis.

Writing in German weekly magazine Wirtschaftswoche, Padoan said the decision to wind down the two banks at a possible cost of up to 17 billion euros was a necessary intervention to save the economy of the Veneto region.

German Finance Minister Wolfgang Schaeuble and Bundesbank president Jens Weidmann have both bemoaned Italy's decision, which was approved by the European Commission and involves the state rather than investors bearing most of the cost.

This goes against the spirit of a framework known as the banking union agreed by European Union member states after the 2008 financial crisis.

"The banking union was adopted and devised after many countries put enormous amounts of taxpayers' money into the stabilisation of their banking sectors," Padoan wrote in a column to be published on Friday. "We are talking about hundreds of billions in Germany and Britain."

Padoan added: "I think the rules are there in order to deal with problems in a fair way that serves the public interest."

The deal to wind down Banca Popolare di Vicenza and Veneto Banca allows Italy to solve a banking crisis on its own terms, ensuring the two Veneto lenders are not wound down under potentially tougher European rules.

Weidmann said on Thursday he saw no willingness by euro zone countries to shift the decision-making powers to a European level and this was evident "not only in the handling of budget rules but also in the adherence to new rules on winding down banks, especially by countries demanding more mutual liability".

His full column will appear in Wirtschaftswoche on Friday. (Reporting by Joseph Nasr; Editing by Toby Chopra)