ROME (Reuters) - Italian Prime Minister Matteo Renzi said on Tuesday he wanted to avoid a "bail-in" -- the use of creditor or depositor money to restructure banks -- just days after a major national lender secured a last-minute, privately-funded bailout.
Renzi also said he was satisfied with Banca Monte dei Paschi di Siena's (MI:BMPS) bailout plan, announced on Friday, which calls for the sale of 9.2 billion euros (£7.78 billion) in bad loans and a 5 billion-euro capital increase.
Under EU rules that took effect this year, public money to bail out banks cannot be used until creditors - shareholders, bondholders and even uninsured depositors - stump up a portion of the cash needed first.
"For me Italy is totally fighting for avoid bail-in because also soft bail-in could be a disaster for the credibility and for the confidence," Renzi said in an interview with CNBC, speaking in English.
Renzi came under heavy criticism last year when a similar burden-sharing plan was used to restructure four small banks, because some of its subordinated bondholders whose money was bailed in were ordinary savers who did not know their risk. One committed suicide.
Having to use the EU's bail-in rules now would open Renzi up to political risks he probably does not want to take ahead of a referendum on constitutional reform later this year that may be crucial to the survival of his government.
"I will win," Renzi said of the referendum in the same interview. "But I think people need to understand what instability will follow."
The referendum aims to seat more stable governments and streamline lawmaking by effectively eliminating the Senate from the process.