The European Commission's internal markets commissioner, Charlie McCreevy, said yesterday he would begin legal action against the Italian central bank next month over its handling of a foreign banking merger.
"I have not signed the letter yet but I expect to do so before Christmas for the start of proceedings against the Italian central bank," Mr McCreevy said at a mortgage industry conference.
The commission's legal action would, he said, accuse the Italian authorities of contravening the free movement of capital and the freedom for businesses to establish themselves in another member state.
The investigation is likely to increase the pressure on the governor of Italy's central bank, Antonio Fazio, who is already being investigated in Italy over his role in the merger of Dutch bank ABN Amro and Banca Antonveneta, a regional bank in Padua.
Earlier this year ABN Amro complained to the European Commission, alleging that the Bank of Italy had illegally favoured a rival bidder for Banco Antonveneta.
The case turns on Mr Fazio's decision to approve a bid for Banca Antonveneta by Banca Popolare Italiana, a bank run by Gianpiero Fiorani, a Fazio family friend, in preference to a rival bid by ABN Amro.
Investigative magistrates have taped conversations between Mr Fazio and Mr Fiorani, which critics say demonstrate bias.
Mr Fazio has ignored calls for his resignation from Silvio Berlusconi, the Italian prime minister, and other politicians, businessmen and former regulators who contend that the affair has damaged the reputation of Italy's financial system.
Mr Fazio said yesterday his aim was always to serve the state.
"To serve the state independently . . . is the attitude that has always inspired the actions of the central bank," he said at a meeting of Bank of Italy employees.
A commission official said any letter would give Italy two months to state its view on the executive's concerns.
If the reply was unacceptable, Brussels would then issue a warning, known as a reasoned opinion, to which an unacceptable reply would trigger infringement proceedings that could take Italy to the European Court of Justice. In infringement cases, a member state typically changes its rules in line with EU laws.
