ROME- The Italian Treasury is discussing with European Union authorities the possibility of extending by more than two years a 2021 deadline to cut Rome's 64% stake in ailing bank Monte dei Paschi di Siena (MPS), two sources told Reuters.

Under the terms of a 5.4 billion euro ($6.12 billion) state bailout agreed with Brussels in 2017, the Treasury was supposed to have a deal in place by the end of this year to re-privatise MPS, but this has not proved possible.

Talks to sell parts of the Tuscan lender to Italy's No.2 bank UniCredit collapsed in October, leaving the Treasury chasing alternative options. 

The Treasury expects to win Brussels' approval for a lengthy extension of the deadline to return MPS to private hands to ensure the bank can relaunch and attract new investors, the sources said, asking not to be named because of the sensitivity of the matter.

The extension being sought will be "more than two years," one of the sources said. This was confirmed by a second source familiar with the matter.

($1 = 0.8839 euros)

(Reporting by Giuseppe Fonte, editing by Gavin Jones) ((giuseppe.fonte@thomsonreuters.com; +390680307711;))