The plan, confirmed to investors in a presentation on Wednesday, will see the closure of 600 out of 2,000 branches and 5,500 job cuts in what bosses hope will bring down the Italian lender's total headcount to about 20,000 by 2021.

Founded in 1472 and considered the world's oldest lender, Monte dei Paschi di Siena was dragged down in recent years by bad loans on its books, aggravated by Italy's record-long recession.

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Under proposals approved on Tuesday by the European Commission, the Italian government will take de-facto control of the troubled bank and dispose of a massive 28.6 billion euros ($32.5 billion) in bad loans. The government will inject 5.4 billion euros, giving it a 70-percent stake.

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The bad loans, with a book value of more than 25 billion euros, will be sold at a price discount of 81 percent, the bank said.

Turnaround will be 'slow'

CEO Marco Morelli called the plan a "key milestone in the process of returning to a growth path," adding that it could be slow going.

But he said Monte dei Paschi hoped to wean itself off state support by the end of the turnaround period. By 2021, the lender is targeting a net income of 1.2 billion euros, versus to a 3.2-billion-euro loss in 2016.

The bailout is the bank's third capital injection in recent years and the third intervention by the Italian government in as many weeks. Two troubled regional banks - Veneto Banca and Banca Popolare di Vicenza - were singled out for closure last month, with big lender Intesa Sanpaolo to be paid 5.2 billion euros to take over their good assets.

Bailouts under scutiny

The two earlier bailouts have been criticized for being too generous to the new lender while effectively circumventing EU rules against state subsidies.

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Italy is under pressure to tackle its so-called zombie banks - institutions saddled with so many bad loans that they cannot give credit to sound businesses and households - because they are a major drag on the struggling economy.

However, banking reform is a political minefield, as the Italian government has to negotiate between EU rules limiting state aid, retail investors demanding public protection from losses, and taxpayers' unhappiness about their money being used to rescue banks.

mm/tr (AFP, AP, dpa)