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Italy offers banks a $15.5 billion lifeline

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Italy is already moving forward with its plan to free up capital for banks to lend to small businesses. Nicknamed "Tremonti's bond" after the minister of finance Giulio Tremonti, the securities now being offered will have an annual yield of between 7.5 and 8.5 percent.

"The idea is to make sure that the money lent to banks will actually be redistributed to the real economy," says Andrea Colli, an economist at Bocconi University in Milan. "It's quite an innovative plan."

One of Italy's largest banks, Banco Popolare, announced last week it would take up the government's offer and accept $1.8 billion in assistance in the form of the bonds. It was the first of the country's banks to tap into the plan.

The bonds are just one of the capital-boosting measures being initiated by European Union countries. In late 2008, the German government injected €8.2 billion ($10.6 billion) in cash aid to Commerzbank, the country's second-largest bank, followed by $19.3 billion in debt guarantees. The Belgian government also gave several billion to shore up the country's major banks.

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