By Isla Binnie
ROME (Reuters) - The death of a pensioner who lost money in Italy's rescue of four small savings banks has turned up the heat on the government, adding politicians to the investors already in an uproar over its handling of the move.
The man hanged himself in a communal staircase at his home in Civitavecchia, near Rome, in late November, a police source said on Thursday. He left a note saying Banca Popolare dell'Etruria, where he had invested more than 100,000 euros (72,114 pound), had been badly managed.
The rescue of Banca Popolare dell'Etruria and three other small savings banks last month is quickly turning into a hot potato for Prime Minister Matteo Renzi.
His government rushed through the 3.6 billion euro ($3.94 billion) scheme to save the banks last month before tougher European rules come into force in January, hoping to avert more losses for small savers that it feared could trigger bank runs.
But after tough negotiations with the EU, it could not spare some 130,000 shareholders and junior bondholders who saw the value of their investments wiped out. In the case of the bondholders, it was the first time since the 1930s that they have suffered losses because of a banking crisis.
Renzi's opponents seized on the investors' angry reactions and the death of the pensioner to cry foul.
The anti-establishment 5-Star Movement and former premier Silvio Berlusconi's centre-right Forza Italia! (Go Italy!) party proposed setting up a parliamentary commission to look into Italy's banking system and the central bank's supervisory role.
"We are in chaos, the government is in chaos, Renzi is in a world of trouble and sadly the tragic results are plain to see," said Forza Italia lower house floor leader Renato Brunetta.
Italy approved the rescue of Banca Popolare dell'Etruria, Banca della Marche, Cassa di Risparmio di Ferrara and Cassa di Risparmio di Chieti, on Nov. 22.
The government was keen to push ahead with the scheme because, from January, new European Union rules on bank rescues will force losses on depositors with more than 100,000 euros as well as bank investors and bondholders.
Matteo Salvini, leader of the right-wing Northern League, said Italy had been "cuckolded" by the European Union, which is keen for the burden of banking crises to be shared by investors and creditors rather than taxpayers at large.
Writing on his blog, 5-Star leader Beppe Grillo slammed the perceived lack of protection for small savers like the pensioner. "The sorrow hanging over Civitavecchia undermines the very foundations on which Italy's communal spirit is based: the savings culture enshrined in the constitution."
COMPENSATION
Rome has been looking for a way to compensate at least some of those who lost their money overnight, but it faces opposition from the European Commission because of state aid rules.
"We are working hard to find a way of giving bondholders above all some kind of compensation, staying within rules which unfortunately we do not write ourselves," Renzi said.
Echoing comment by the Bank of Italy's head of supervision on Wednesday, he said he was proud to have stepped in and saved jobs and current accounts. Consumer groups said the banks in question may have not warned their customers that junior bonds were not risk-free.
European Commissioner Jonathan Hill said in Brussels that the consequences of the bank rescue had been very difficult for some people, and the case spoke to the need for transparency to create confidence among retail investors.
"These banks in question were selling unsuitable products to people who maybe didn't know what they were buying," Hill said.
"We need to have savers, citizens, feeling able to invest safely in financial products and ... have a framework that means there is redress if something goes wrong."
(Writing by Isla Binnie; Editing by Silvia Aloisi and Tom Heneghan)
