By Giuseppe Fonte and Valentina Za

ROME (Reuters) -Italy’s Treasury is confident it will be able to announce a deal to sell selected parts of state-owned bank Monte dei Paschi (MPS) to rival UniCredit next month, four sources close to the matter told Reuters on Friday.

A slowdown in talks ahead of a vote on Oct. 3-4 in MPS’ hometown of Siena to fill a vacant parliamentary seat had raised doubts over the chances of an agreement, weighing on the Tuscan bank’s riskier debt this week.

Italy’s No.2 bank UniCredit agreed on July 29 to enter exclusive negotiations with Rome over MPS, which is 64% owned by the state following a 2017 bailout that cost taxpayers 5.4 billion euros ($6.3 billion).

Three of the sources said the parties had yet to exchange a comprehensive set of figures on the final terms of the deal, which Rome will need to run past European Union authorities to ensure it complies with rules on state aid to banks.

The parties are expected to show their hands in full only after the October vote, which may prompt the leader of the Democratic Party, a member of Prime Minister Mario Draghi’s coalition, to resign if he fails to win the Siena seat.

UniCredit declined to comment.

Italy has set aside 1.5 billion euros to recapitalise MPS in light of the sale, but two of the sources said it was too early to put a number on the final size of the cash call. It could even be lower than the sum earmarked, one source said.

The cost of the re-privatisation and the prospect of thousands of early staff exits at MPS ahead of the sale have fanned political opposition to the deal.

On Friday, lawmakers in the right-wing League party said it would be a mistake to undersell the world’s oldest bank, as MPS’ workers went on a strike to back unions’ demands to have a role in the talks.

UniCredit, which had discussed an MPS deal with the Treasury under previous CEO Jean Pierre Mustier, will only consider an acquisition that leaves its capital buffers unaffected and boosts earnings per share by 10%.

New Unicredit CEO Andrea Orcel wants to grow the lender’s presence in Tuscany, Lombardy, Emilia Romagna and the Veneto, while leaving behind MPS’ branches in Italy’s poorer south – as well as any problem or risky loans and legal risks stemming from mismanagement.

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(Reporting by Giuseppe Fonte and Valentina Za in Milan, additional reporting by Francesco Zecchini in Rome, editing by Gavin Jones and Louise Heavens)