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Pressure grows on Italy’s Fazio

September 25, 2005

By Phil Stewart and Francesca Landini

ROME/WASHINGTON (Reuters) – Italy’s government stripped
Bank of Italy Governor Antonio Fazio of his authority to
represent the country at a World Bank meeting on Sunday, piling
pressure on him to resign over a takeover scandal.

Economy Minister Giulio Tremonti, a longstanding adversary
of Fazio, told the central banker in a tense phone call on
Saturday that he would not lead Italy’s delegation to the World
Bank Development Committee meeting, Italian officials said.

“Mr Tremonti relieved him of his duties,” an Italian
official in Washington told Reuters. A second official in Rome
confirmed Tremonti had revoked Fazio’s authority to address the
committee in Washington.

Fazio abruptly flew back to Rome a day early, underscoring
increasingly tense relations between the central banker and
Italy’s government, which has called for him to step down over
a bank takeover scandal but which cannot fire him.

The 68-year-old governor has come under mounting pressure
to resign since leaked wire taps made public in July fueled
accusations he favored a local Italian bank, Banca Popolare
Italiana, in a battle with Dutch lender ABN AMRO for control of
Banca Antonveneta.

Fazio, who has been governor since 1993 and has an
open-ended mandate, says he did nothing wrong.

Prime Minister Silvio Berlusconi and several powerful
cabinet ministers, along with the opposition and large parts of
the media, have urged Fazio to resign, saying Italy’s
international credibility has suffered.

But Fazio can only be fired by a central bank committee
considered close to the governor, and he has stood firm,
leading to the unprecedented impasse. He has the backing of
Berlusconi’s most loyal coalition partner, the Northern League
party.

Domenico Siniscalco abruptly resigned as economy minister
on Thursday after failing to force Fazio out. Siniscalco was
replaced by Tremonti.

TARNISHED CREDIBILITY

Although the government cannot fire Fazio, Tremonti used
his prerogative as head of Italy’s delegation to the meetings
in Washington to prevent the central banker from addressing the
World Bank’s policy-setting Development Committee.

Fazio returned home to Rome on Sunday in a private plane,
according to a source at Ciampino airport.

There was no official comment from the Bank of Italy.

Fazio has led Italy’s delegation to the World Bank’s
policy-setting Development Committee since 1999, according to
World Bank documents. He told journalists in Washington on
Saturday that he planned to attend the Development Committee.

Tremonti named Ignazio Angeloni, director of the Italian
Treasury’s international affairs department, to replace Fazio
at the head of the country’s delegation to the Development
Committee meeting, officials said.

The standoff between Fazio and the government has tarnished
Italy’s credibility, analysts have said. Tremonti on Friday
used his first public words since becoming economy minister to
poke fun at Fazio by derisively imitating his voice.

Berlusconi has acknowledged that the government has no
power to oust Fazio, and said only the European Central Bank
has the authority.

But the ECB has said it cannot revoke Fazio’s mandate, and
that it would fall to the central bank’s Superior Council.

The Superior Council, made up of prominent figures from
business and academia, could revoke his mandate by a two-thirds
majority of its 13 members. But it is considered close to
Fazio, and newspapers said it would be unlikely to turn on him.

The council will hold a meeting on Thursday, but was not
expected to take up any motion against Fazio.

Rome prosecutors investigating possible crimes at Popolare
Italiana plan to question Fazio in coming days, judicial
sources have said. Questioning would not imply guilt but could
eventually lead to charges.




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