Italy has been pushing for a private bailout
European stress test results are due after the close of the US stock market today and one bank that's widely expected to fail is Monte Paschi.
Italy's third largest bank has been in trouble for years and the government has been trying to engineer a bailout but EU rules prevented that move without a bail-in of junior debt holders. Renzi wanted to avoid that so the bank looked to some type of private bailout.
It appears that's what has taken place and that the ECB has approved the plan. Of course, the devil is in the details but Monte Paschi will want to have something worked out by the time markets open on Monday.
In any case, there could be some upside for the euro if the stress test results are positive aside from a few well-known bad apples. Then again, given the suspiciously strong day for European bank shares, that might already be priced in.
Update: Monte Paschi officials now say the ECB has approved its plan. It will be interesting to see if we get the details before the close.