–ECB’s Panetta a possible candidate
By Silvia Marchetti
ROME (MaceNews) – The choice of who will be Italy’s next economy and finance minister will be key in determining the winning center-right coalition’s credibility on world markets, and its power in campaigning against more European Central Bank rate hikes.
The center-right alliance, which includes the far-right Brothers of Italy group, Forza Italia, and the League, are working on identifying who will take on key ministry roles, with the most strategic, and tough in terms of appointment, being that of economy minister.
This will be a crucial week in defining Italy’s next cabinet composition as the newly-elected parliament prepares to meet on Thursday.
A center-right source argued that the economy minister position must be filled by a highly-qualified technocrat rather than a politician, so to boost Italy’s credibility on the world stage and show continuity with Mario Draghi’s legacy.
“That choice will be the first reassuring sign we will send out to markets to keep the spread level and borrowing costs down, and it will be a decision taken by the Brothers of Italy leader Giorgia Meloni, who has won the most votes, in agreement with all other (coalition) allies,” said the source.
Among the potential candidates is current ECB governing council member Fabio Panetta, who has lately sent out mixed messages regarding his availability, neither ruling it completely out nor opening up to it.
According to outgoing ruling coalition sources familiar with central bank appointments procedures, were Panetta to take on the job as finance minister, he would be abandoning a key ECB position within the governing council which, now held by Italy.
“It could be a very risky move: it is not automatic that Panetta’s empty seat be filled by another Italian, it could happen, but there is no written rule. It depends on the power, and credibility, of the government in charge to secure the seat, and certainly the next rightist cabinet does not have such standing at the moment,” said the official.
It might be more convenient for Italy to keep Panetta in position at the ECB, added the source.
“He is the most dovish within the governing council, advocating against quick rate hikes. And if he takes on the role of finance minister, he would never have the possibility of becoming the next Bank of Italy governor,” the source said.
Panetta, as a successor to Ignazio Visco, could stay on for two full mandates as governor, meaning 12 years straight, much longer than a cabinet minister mandate.
However, center-right sources noted that it would be very hard for anyone, including Panetta, to turn down the offer from Italy’s head of state to be named the next economy and finance minister.
Panetta’s opposition to further ECB rate hikes fits well with the next government pro-accommodative fiscal stance. Meloni, set to become Italy’s first woman prime minister, recently spoke out against the ECB’s decision to raise rates, voicing concern it could fuel the eurozone’s economic downturn.
Italy’s next cabinet will push hard against more rate hikes to shield its soaring public debt, so whoever takes on the job as finance minister is expected to be super-dovish.
A center-right member of parliament noted that both Panetta and Visco recently warned on the risk that further, and sudden rate hikes could trigger a recession.
“It’s pretty obvious that there is no general consensus within the ECB on how to carry on in the normalization phase. It seems that a rates’ war’ is coming up, between doves and hawks, and that at each decision on whether to raise rates there will be very heated discussions.”
Officials, even within the outgoing cabinet, are worried that the impact of the ECB’s moves are failing to reach the target — that the rise in rates has reduced inflation.
Other potential candidates for the role of Italy’s next finance minister include former economy minister Domenico Siniscalco and former European Investment Bank chief Dario Scannapieco.
Sources within the outgoing ruling coalition noted that even though potential candidates are all technocrats, were one to take on the job he would be automatically “marked as pro-rightist.”