EU finance ministers backed sanctions on Spain and Portugal for breaching European rules on budget deficit targets on Tuesday. The European Commission — the executive arm of the EU — now has 20 days to recommend if fines should be imposed.
This followed a meeting on Monday at which Italy was warned to play by the rules regarding bank bailouts. Italy wants to use public finances to recapitalize its ailing banks, but that would break European banking rules that require creditors to take losses too.
"We are working very hard with the (European) Commission, which is taking a very cooperative approach," Pier Carlo Padoan, Italy's minister of economy and finance, told CNBC on Tuesday.
"I am confident we will soon reach an agreement which will be in the best interest of Italy, of Europe and within the rules," he added.
Italian banks outperformed peers on Tuesday, with UniCredit closing up over 13 percent. This came after the bank revealed it had successfully listed 10 percent of its online brokerage FinecoBank at 5.40 euros ($5.98) per share, enabling it to pocket 328 million euros, according to Reuters.
UniCredit's rise boosted other Italian lenders including Mediobanca, UBI Banca and Intesa Sanpaolo.
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Correction: This article has been corrected to reflect the market moves relate to Tuesday