SIENA, Italy — Operators of kindergartens and ambulance services had to find new sources of funds. A biotech company filed for bankruptcy. The local professional soccer team slipped into the minor leagues after it could no longer afford the salaries of its top players.

And twice a year, when it is time for the Palio, Siena’s famed bareback horse race, neighborhood clans must pay for their own costumes.

Siena, a city in central Tuscany, is scrambling to fill the financial hole caused by the near collapse of Banca Monte dei Paschi di Siena, the world’s oldest bank.

The foundation that owned the bank bankrolled a broad range of social services and cultural events, showering 150 million euros a year, about $170 million, on Siena and the surrounding region. The bank was the city’s largest private sector employer.

Now, Siena is trying to attract outside investments and show that, contrary to Italy’s reputation for being unfriendly to businesses, it can foster entrepreneurship and create jobs. It is the same challenge facing all of Italy, which has barely grown since the 1990s and has weighed on the broader European economy.

“Everyone is aware that a new growth engine is needed,” said Angelo Riccaboni, head of the University of Siena. “In Siena, people have to change their mentality. Now you need to be a risk-taker.”

Since its founding in 1472, Monte dei Paschi and its wealth have been at the center of life in Siena. The bank survived plagues, panics and wars. Its headquarters are still located inside a medieval fortress.

But modern financial hubris felled the centuries-old bank. In 2008, Monte dei Paschi acquired a rival to become Italy’s third-largest bank. The €9 billion price tag was considered too high, even at the time, and bank management compounded the blunder by engaging in a series of derivatives transactions that later produced huge losses.

Last week, Monte dei Paschi completed a sale of shares valued at €3 billion and replenished its capital. But the bank is gasping under a pile of bad loans and has effectively put itself up for sale, which could mean moving its headquarters away from Siena. Fabrizio Viola, the bank’s chief executive, said that Monte dei Paschi will continue to support Siena as a bank, though not as a benefactor. “We are ready to support the economy with good credit at the right price,” he said.

Siena is slowly adjusting to life with a greatly diminished Monte dei Paschi.

Some of the changes have been small. The Misericordia di Siena, which provides ambulance service and other health care services, is making up the lost funds by renting out real estate and collecting more money from members and other private sources.

“Had we survived only with the foundation’s money, we’d have gone belly up,” said Mario Marzucchi, president of the Misericordia, which has been operating for more than seven centuries.

Other activities financed by the foundation were less essential, like a club for the spouses of doctors, and the colorful costumes that members of the city’s Contrada, ancient neighborhood associations, wore in processions that preceded the Palio races.

“There was too much money. Everything was easy,” Marcello Clarich, the president of the Monte dei Paschi Foundation, said in his office overlooking the Piazza del Campo. “Now we are going back to normality.”

A broader economic overhaul will take longer.

As Siena looks to reinvent itself, the city, in part, is looking to that past. With a large and well-preserved medieval center, Siena is crowded with tourists in the summer but is often underbooked the rest of the year.

Work has long been underway to improve the highway that connects Siena with Florence, and local officials have staged off-season running and cycling events to attract sports tourists. Such events helped increase tourism by an estimated 10 percent last year.

But tourism will not replace the high-paying jobs Monte dei Paschi once provided.

To fill that gap, local and regional officials are trying to turn Siena and the surrounding province of Tuscany into “Pharma Valley,” an international center for drug research and development. (The region has a long history of vaccine research.) The British drugmaker GlaxoSmithKline has a large research and production operation in Siena.

The effort suffered a blow when one of the most visible start-ups, Siena Biotech, filed for bankruptcy in April. Despite spending 14 years and €160 million seeking treatments for Alzheimer’s and Huntington’s diseases, the company never produced any marketable therapies.

The failure of Siena Biotech, which depended entirely on the Monte dei Paschi Foundation, is seen as a cautionary tale about the insular old ways of doing things.

“The concept was wrong,” said Mr. Clarich, a law professor who has been chairman of the foundation since last year. “The foundation had a lot of money and said, ‘We can do it alone.’”

Earlier this year, Siena Biotech workers occupied the headquarters for more than two months, sleeping on air mattresses and demanding more funding. “We are all very attached to research. We all grew up here,” said Michele Midollini, a 35-year-old former manager at Siena Biotech who was taking part in the occupation, which ended May 1.

Now officials are trying a new strategy.

In a plain concrete building just down the street from Siena Biotech, Toscana Life Sciences is serving as an incubator for 16 start-ups developing new technologies and related services. It is trying to mold the small pharmaceutical companies scattered around the region into a cluster that can feed off each other and take better advantage of the proximity of GlaxoSmithKline as well as Eli Lilly, which has a drugmaking plant outside Florence.

The organization, a public-private partnership, is providing space as well as some funding. For example, the organization is supporting research into the therapeutic qualities of ingredients found in local products like olive oil and red wine, among other activities. It is also working with local universities.

But the effort — along with the rest of the economic overhaul — also requires a government rethink.

Investors won’t come to Tuscany “just because it’s more beautiful and has better wine,” said Andrea Paolini, director general of Toscana Life Sciences. Entrepreneurs here, as with much of Italy, face a mountain of red tape and a slow-moving justice system that make it difficult to resolve business disputes.

So officials are trying to reduce the bureaucracy. For example, the regional government has consolidated the number of committees it needs to approve a clinical trial to one, from 16.

“This is critical for companies,” said Luigi Marroni, the regional minister of health. “If it takes six months to get an approval in Tuscany and two months in New Jersey, they’ll go to New Jersey.”

The local government, too, is adopting a new attitude.

In January, the University of Pittsburgh Medical Center, a nonprofit health care provider, decided to open a center to diagnose liver and digestive ailments in Chianciano Terme, a town near Siena known for its healing waters. Officials in Siena helped accelerate the approval process, and the center opened in June.

“Our impression is that the local government is really pushing hard,” said Bruno Gridelli, the executive vice president of U.P.M.C. International. “They understand that if they want to improve the economy, particularly after the problems of Monte dei Paschi, they need to attract investment.”

The city of Siena is also trying to become more efficient.

The city government cut its municipal debt by more than 25 percent to €74 million, sold city real estate and stopped using an outside contractor to collect taxes, in order to save costs. Officials are also working on centralizing procedures like building permits, a process that can take years.

“The only way to save the city is to renew it,” said Bruno Valentini, the mayor of Siena.

Still, Siena is at the start of the process.

Throughout Italy, attempts to streamline government still face huge resistance from civil servants who fear for their jobs. And remaking Siena is not any easier without the riches once bestowed by the bank.

“We started out with a cruise liner and ended up with a wooden raft,” Mr. Paolini said. “I can’t say I’m pleased.”