September 23, 2005

Standoff in Italy as minister mocks Fazio

By Francesca Landini

WASHINGTON (Reuters) - Italy's new economy minister on
Friday used his first public comments in office to poke fun at
central bank governor Antonio Fazio, who has spurned a demand
from Prime Minister Silvio Berlusconi to quit.

Economy Minister Giulio Tremonti was attending meetings of
the Group of Seven and the International Monetary Fund in
Washington with his long-time adversary Fazio, as commentators
warned Italy's credibility was plumbing new lows.

The standoff over the Bank of Italy compounded problems for
Berlusconi after former Economy Minister Domenico Siniscalco
resigned on Thursday complaining about the prime minister's
unwillingness to drive Fazio from office.

"If you don't go away, I'll have you roughed up a bit,"
Tremonti told reporters, imitating the voice of the central
bank chief who is under pressure to step down over allegations
he was biased in bank takeover battles that he was supposed to

Last October, in a now famous episode caught on television
in Italy, Fazio tried to avoid an insistent reporter from an
Italian satirical TV program, telling his body guards to "rough
him up a bit."

Tremonti, who had a bitter relationship with Fazio during
his previous stint as economy minister between 2001 and 2004,
flew to Washington immediately after being named minister on
Thursday and vowed to make Fazio's life tough.

"I'm going to completely ignore him," Tremonti was quoted
as saying by Corriere della Sera newspaper on Friday, adding:
"I really want to see his face when he sees me."

Opposition leader Romano Prodi said the situation was
"making us a laughing stock" on the international stage, adding
Berlusconi should resign to open the way for a snap general
election, some eight months ahead of schedule.


Berlusconi turned his guns on Fazio on Thursday -- too late
to prevent Siniscalco's exit -- telling the central banker he
should step down over accusations he unfairly favored a local
bank in a cross-border takeover fight.

On Friday, the prime minister denied he had expected an
immediate reaction from the central bank chief.

When asked by reporters in Rome if he had anticipated a
next-day response from Fazio, Berlusconi said "no" and added
that he hadn't spoken with him at all.

His inability to oust Fazio, who has helped prompt the
resignation of two of his economy ministers over the past two
years, has underscored deep coalition rifts that have hobbled
the government's effectiveness.

As a result, Berlusconi was facing an open challenge to his
own leadership credentials from inside the coalition, with one
government ally saying openly on Thursday that he was not the
best person to head the center-right ticket.

In comments on a late night TV talk show on Thursday,
Berlusconi, for the second time this month, said only the
European Central Bank could dismiss Fazio -- "if it believes he
has broken the law."

But a senior ECB official rejected the prime minister's
contention, saying only the BOI's superior council could revoke
his mandate by a two-thirds majority of its 13 members.

Berlusconi's divided government has not taken the
unprecedented step of urging the superior council to oust
Fazio. His cabinet met on Friday but did not discuss the issue.

Fazio has consistently denied wrong doing in his handling
of a takeover battle that pitted Banca Popolare Italiana
against Dutch lender ABN AMRO for control of Banca Antonveneta.

Although Fazio has been able to resist pressure to resign,
he faces the uncomfortable prospect of being questioned by
Roman magistrates investigating possible crimes in the
Antonveneta takeover, judicial and legal sources have told

The questioning, which would not imply Fazio is guilty but
which could lead to charges, is expected in coming days.

(Additional reporting by Gavin Jones in Rome)