Berlusconi sidesteps Fazio issue

Italian prime minister Silvio Berlusconi yesterday steered clear of exerting more pressure for the resignation of Antonio Fazio, the Bank of Italy governor whose defiance has plunged the government into turmoil.

Mr Berlusconi told parliament he did everything in his power to secure Mr Fazio's removal after Domenico Siniscalco resigned as finance minister last week in protest at the impasse.

Mr Berlusconi said: "The government could not intervene directly, so I did the only thing that could be done - I appealed to the governor, to his sensitivity and to his conscience."

Mr Fazio is under fire from politicians, businessmen, former regulators and economists over his conduct in a cross-border bank takeover controversy in which critics say he improperly favoured Italian institutions.

Mr Fazio, who denies any wrongdoing, is proving so resistant that some of his opponents say Carlo Azeglio Ciampi, Italy's head of state, must take a stand. Mr Ciampi, a former prime minister and Bank of Italy governor, commands respect in Italy and abroad. He has avoided commenting on the affair, but a statement criticising Mr Fazio might persuade him to step down.

However, Mr Ciampi is anxious to protect the central bank's independence from political pressure. The only Italian institution with the formal power to remove Mr Fazio is the Bank of Italy's board of directors, most of whom are thought to be loyal to him. The board is to hold a regular meeting tomorrow.

Mr Berlusconi said after Mr Siniscalco's resignation that it was no longer "opportune" for Mr Fazio to remain in office.

Opposition politicians have criticised Mr Berlusconi for not being more explicit in demanding his removal. Mr Berlusconi's reluctance to press for Mr Fazio's resignation is connected with his desire to hold his quarrelling centre-right coalition together as Italy prepares for elections by next May.

The populist Northern League, a junior government party whose electoral base in northern Italy Mr Berlusconi values, opposes the calls for Mr Fazio to resign.

"The Fazio case is closed," Roberto Calderoli, a senior League politician, said yesterday.

Giulio Tremonti, who replaced Mr Siniscalco as finance minister, said that it was more important to concentrate on the 2006 budget, which the cabinet must approve by Friday before sending it to parliament for approval. Mr Berlusconi said the budget would include €25 billion in cost-saving and revenue-raising measures, of which € 12 billion would be used to reduce Italy's deficit.

Last weekend, Mr Tremonti sought to embarrass Mr Fazio by nominating a junior official to appear at a meeting of the World Bank in Washington. Mr Fazio had been expected to attend. Instead, he flew back to Rome. - (Financial Times Service)