Silvio Berlusconi has ended months of procrastination and U-turns that dented Italy’s credibility on the international stage by nominating Ignazio Visco to succeed Mario Draghi as the next governor of the Bank of Italy.
The surprise nomination of Mr Visco, currently number three at the central bank, was confirmed by senior government insiders on Thursday night. It followed 24 hours of intense drama, with Italy’s prime minister twice changing his mind under pressure from the Bank of Italy and cabinet ministers.
A day earlier Mr Berlusconi had fixed on Lorenzo Bini-Smaghi, an executive board member of the European Central Bank. But after intense pressure from the Bank of Italy, which had insisted on an insider, Mr Berlusconi gave the nod to Fabrizio Saccomanni, 68-year-old director-general of the bank.
But only hours later, Mr Berlusconi – possibly acting under pressure from Giulio Tremonti, finance minister – told Giorgio Napolitano, the president who has the final say in the matter, that he would nominate Mr Visco, deputy director-general, instead.
This leaves Mr Berlusconi contemplating an uncomfortable showdown this weekend with Nicolas Sarkozy, president of France, who has publicly demanded the departure of Mr Bini-Smaghi from the ECB board to make way for a French candidate.
Mr Bini-Smaghi had made it known he would not leave his ECB post before schedule in June 2013 unless he were given Italy’s top banking job.
“It is going to be war between France and Italy,” a European diplomat said – unless Mr Bini-Smaghi can be persuaded to leave Frankfurt.
A well placed banking insider said both Mr Visco and Mr Saccomanni, had made it known that they would resign if Mr Berlusconi nominated a governor from outside the bank.
Reports that Mr Berlusconi had decided on Mr Bini Smaghi led to a storm of criticism in the press on Thursday with editorials arguing that his nomination had been effectively dictated by Mr Sarkozy.
“It has been an enormous tangle, a messed up procedure, a glaring demonstration of lack of leadership and national dignity,” Corriere della Sera, Italy’s leading daily, thundered in a front-page editorial.
Giulio Tremonti, Italy’s finance minister, had pushed for the candidacy of Vittorio Grilli, head of the Treasury.
Mr Tremonti, frequently at odds with Mr Draghi, who is to lead the ECB from November 1, feared that the Bank of Italy would become a pliant extension of ECB power if Mr Saccomanni were appointed governor.
Mr Visco, however, is said to have clashed with Mr Draghi at times over internal decisions at the bank. One official, who asked not to be named, described their relations as “not too easy”. Mr Draghi was reported to have supported the candidacy of Mr Saccomanni.
Mr Visco, highly respected as an economist, first joined the Bank of Italy in 1972, later taking his PhD at the University of Pennsylvania and serving for five years as chief economist at the Organisation for Economic Co-operation and Development. He has given tough warnings to Mr Berlusconi’s centre-right government about its failure to deliver economic growth, saying Italy’s debt costs were unsustainable in the long term.
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