Are Monte dei Paschi Shares Surging On Government Bailout Potential?

In the wake of the Italian referendum loss, which was thought to throw a wrench into the bailout mechanics for the weakest regional banks, troubled stock prices are higher. After bottoming for the month on November 28 at 7381, the FTSE Italian Bank index is now trading at 8989 – up over 10% in just over one week. But more peculiar, Europe’s weakest bank as measured by stress test results, the scandal-plagued Banca Monte dei Paschi di Siena SpA, is up over 10% on Wednesday alone.

What is behind the rise in the troubled bank stocks? It could be new found confidence in their reliable political connections and government bailout potential. A new Barclays report under the headline of...