Italy works to grant Monte Paschi aid by Friday - sources

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By Giuseppe Fonte | February 28, 2013 3:14 AM EST

The Italian treasury is working to meet a March 1 deadline for granting a 3.9 billion euro state bailout to Monte dei Paschi , the country's third-biggest lender, a source close to the matter told Reuters on Wednesday.

The source dismissed a Bloomberg report that said the outgoing caretaker government led by Mario Monti was considering postponing the bailout and leaving the final decision on the payout to the next government.

A government source also dismissed the report, saying there was no political reason to delay the bailout after this week's parliamentary elections produced an inconclusive result.

A third source with knowledge of the situation said only formal procedures remained to be completed and was not aware of any particular hurdles for the aid to be granted.

Monte dei Paschi declined to comment.

Shares in the bank, Italy's third largest, fell just over 2 percent by 3.35 p.m. British time, with one Milan trader citing market rumours of a bailout delay.

Monte dei Paschi requested the bailout last year after failing to meet tougher capital requirements set by European regulators.

Under the scheme, it is due to issue 3.9 billion euros of bonds to the treasury by March 1.

However, the prospect of a prolonged stalemate after no political bloc secured enough seats to form a majority in parliament has raised questions over whether the outgoing government would succeed in granting the controversial bailout by Friday's deadline.

Adding to the confusion, consumer watchdog Codacons said on Wednesday it had appealed against a court ruling in which the government was given the green light to give the aid to Monte dei Paschi.

Codacons is seeking to block the bailout, saying it wants Monte dei Paschi nationalised.

The appeals court will decide on March 22 after rejecting a request by Codacons to suspend the bailout with immediate effect, a judicial source said.

Monte dei Paschi had to raise its request for state aid by 500 million euros last November after discovering loss-making derivatives trades carried out by the previous management which are now at the heart of a judicial probe by prosecutor in Siena.

(Reporting By Giuseppe Fonte, wiritng by Silvia Aloisi; editing by Keith Weir)

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