By Giuseppe Fonte and Gavin Jones
ROME (Reuters) -Italian Economy Minister Daniele Franco said on Wednesday the government will take care to safeguard jobs and the local economy in the case of a takeover of struggling bank Monte dei Paschi di Siena by larger rival UniCredit.
UniCredit last week agreed to enter into exclusive talks with the Treasury to buy "selected parts" of Monte dei Paschi (MPS), which is 64% state-owned after a 5.4 billion euro ($6.39 billion) bailout in 2017.
Trade unions and politicians immediately expressed concern over the possible impact on jobs and the economy of Siena, a city where MPS is a major employer, and the surrounding region of Tuscany.
"I strongly hope we can close (a deal), but we won't do so at any cost," Franco told parliament.
In testimony to a panel of lower and upper-house lawmakers, Franco said it was a "a priority of the government" to protect MPS' workers, the bank's brand, and the local economy to the furthest extent possible.
He also said the Treasury would not try to negotiate with European Union authorities to delay selling its stake in MPS.
He said lay-offs at MPS, which have loomed over the company for years, will probably have to be considerably more than the 2,500 redundancies foreseen by the bank in its 2021-2025 plan set out earlier this year.
The bank has 21,000 workers, of which some 1,400 are employed in its central offices in Siena.
Redundancies of nearly a third of MPS' staff are expected in a deal with UniCredit, a source close to the matter told Reuters this week, with the state bearing a cost of more than 1.4 billion euros in early-retirement welfare measures.
Under the potential deal, Franco said UniCredit would be exempted from taking on MPS' bad debts and legal risks stemming from the smaller bank's pending lawsuits. These legal risks have built up after decades of mismanagement and scandals.
Stress tests conducted last week by the European Union showed MPS needs "a large-scale structural strengthening," Franco said.
The bank previously envisaged a capital boost of 2.5 billion euros under a stand-alone scenario, but Franco said without a merger with a strategic partner the figure would have to be far higher. This would involve "considerable risks," he warned.
Franco said he saw no risk the talks with UniCredit would result in a "breaking up" of MPS, and added that the state has set aside 1.5 billion euros to recapitalise the bank in the context of a merger.
To sweeten a deal, the Treasury has also lined up tax incentives for mergers approved in 2021 that entail a 2.2 billion euro capital boost in a UniCredit-MPS deal.
($1 = 0.8447 euro)