Agreeing that this was a positive development for Italy’s overall banking system which is still weighed down by around 300 billion of bad loans, Eric Lonergan, fund manager at M&G, argued that the emphasis placed by the deal’s proponents on the need to safeguard the Venetian economy is overplayed but necessary in this case.

“Finally there’s some pragmatism…they have to exaggerate significance to get away with state aid,” he contended, referring to the justification being cited for protecting senior bondholders and depositors, many of whom are local customers of the failing banks which are located in the relatively prosperous north-eastern corner of Italy.

“Italy is in the early stages of an economic recovery. They absolutely should not do anything to threaten that, they need to encourage it,” he added.

However, while the outcome is positive overall, according to Lorenzo Codogno, founder & chief economist at LC Macro Advisors, the terms could have been tweaked to allow senior debt investors to have weathered some pain without destabilizing the system.

“A small haircut of senior bondholders would have been acceptable in my view – it would have not undermined financial stability,” Codogno posited to CNBC’s Squawk Box on Monday.

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