Monte Paschi Rescue Pushes EU Bank-Failure Rules to the Brink

Europe’s big idea for ending the era of public bailouts is at risk of flunking its first major test: Banca Monte dei Paschi di Siena SpA.

The Italian government wants to short-circuit a system European Union lawmakers spent years building to ensure that investors, not taxpayers, foot the bill for failing banks. The outlines of a rescue for Monte Paschi were announced on Dec. 22, and while some aspects of the plan remain hazy, the challenge to the EU’s efforts to sever the link between banks and states is clear.