Fazio faces more pressure to resign as authority to represent Italy revoked

Italy's government stripped central bank governor Antonio Fazio of his authority to represent the country at a World Bank meeting yesterday, piling pressure on him to resign over a takeover scandal.

Economy minister Giulio Tremonti, a longstanding adversary of Mr 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 said.

A second official in Rome confirmed Mr Tremonti had revoked Mr Fazio's authority.

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

The 68-year-old governor has come under mounting pressure to resign since leaked wire taps made public in July fuelled accusations he favoured Banca Popolare Italiana in a battle with Dutch lender ABN Amro for control of Banca Antonveneta.

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

But Mr Fazio, who has been Bank of Italy governor since 1993 and has an open-ended mandate, says he did nothing wrong and has defied calls to quit, leading to the unprecedented impasse.

Mr Fazio can only be fired by a central bank committee but it is considered close to the governor. He also has the backing of Mr Berlusconi's most loyal coalition partner, the Northern League.

Domenico Siniscalco resigned as economy minister on Thursday after failing to force Mr Fazio out.

He was quickly replaced by Mr Tremonti, who used his first public words as new economy minister to poke fun at Mr Fazio by derisively imitating his voice.

Mr Fazio had led Italy's delegation to the policy-setting development committee since 1999, according to the World Bank.

But Mr Tremonti used his power as head of Italy's delegation to the Washington meetings to replace the governor at the development committee with Ignazio Angeloni, director of the Italian treasury's international affairs department.

The Bank of Italy had no official comment. Mr Berlusconi has said the government cannot oust Mr Fazio and only the European Central Bank can do so. But the ECB says only the central bank's superior council can revoke his mandate.