–Not ‘automatic’ Italy is granted top seat on ECB governing council if Fabio Panetta returns to Rome
By Silvia Marchetti
ROME (MaceNews) – Rome’s government will appoint in October the successor to current Bank of Italy Governor Ignazio Visco, with ECB governing council member Fabio Panetta among the leading candidates, which could make the nomination ‘very risky’ for Italy’s governing council position, warned ruling coalition sources.
“Visco has already done two six-year mandates, and even though many officials dream of placing as his successor current ECB GC member Fabio Panetta, the move could seriously jeopardize Italy’s hard-won position in Frankfurt,” said a source.
Officials argued that any next successor must show “BOI leadership continuity” to avoid market instability due to uncertainty over the new BOI leader’s policy.
Panetta might seem the natural successor to Visco, with his return to Rome likely for 12 years (two mandates), but his departure from the ECB could deprive Italy of a top seat within the GC, with no guarantee that the position would be awarded to another Italian representative.
“It’s all power politics. It doesn’t work ‘out goes an Italian, in comes another Italian’; it could happen, but there is no written rule. It depends on the power and credibility of the (Italian) government in charge to secure the seat, and certainly this rightist cabinet does not have such standing at the moment,” said a Democrat official.
Had Mario Draghi still been prime minister, chances would be much higher for Italy to maintain the chair, almost certain.
It is also more convenient for Italy to keep Panetta at the ECB for two reasons, added another government source.
Ruling coalition sources argued Panetta is the most dovish within the governing council as he opposes quick rate hikes and the fast unwinding of accommodative monetary policy which would boost Italy’s already high borrowing costs.
Second, Panetta would remain the only Italian in a top ECB job when Andrea Enria, head of the Supervisory Stability Mechanism (SSM), will step down at the end of this year when his mandate will expire.
“We cannot afford to lose two key figures, at the same time. It would be suicide,” said the source.
Rome is also aware that the power balance within the Eurozone has changed over the last six years, shifting towards new member states that are raising pressure to be granted top ECB seats within the GC, putting an end to the ‘unwritten rule’ that usually has the big three countries – France, Italy, Germany – always secure a chair.
Italy would like to keep the spot, but so far Rome sources say no alternatives to Panetta have been discussed, nor has the ruling coalition at the moment any preference for other EU candidates. “It’s still too soon ahead of time, let’s see how it pans out,” said a government source.
“Also, even at Eurozone level, no official talks are under way on who could replace Panetta among other representatives from other countries,” the source said.
That is why to avoid summoning Panetta back to Rome, there might be an easier ‘internal solution’. Other potential Visco successors could be high-ranking members of the Bank of Italy directorate, chosen among the three deputy governors (Alessandra Perazzelli, Piero Cipollone, Paolo Angelini) and the senior deputy governor (Luigi Signorini), just below the governor in the BOI’s hierarchy. This solution has almost always been adopted in the past.
A third option, although less likely, could be picking an external figure like a high-level expert or professor. Among the names which have more than once come up during BOI chief appointments is that of Lucrezia Reichlin, an economics professor at the London Business School and a former director general of research at the ECB.
The decision on who will become the next head Italy’s central bank is mainly a political one.
The government has a direct, but not exclusive, say-so on the matter which however has a great weight, argued an official. The process of appointment does not involve any sort of vote or election but is made by joint designation from the prime minister and Italy’s head of state.
According to Italian law, the prime minister indicates the name of one single possible candidate and forwards it to the Bank of Italy’s board of directors for their opinion. Once the board has expressed their view, the candidate’s name is then sent to the head of state, who appoints the new governor by presidential decree. So, the whole process starts at the government’s headquarters.
One governor can run for just two consecutive mandates.
So far Premier Giorgia Meloni has expressed no preference, at least publicly, but has always eyed Panetta as a powerful figure to have in Rome. She had initially considered him in September as a finance minister of her cabinet but then dropped his candidacy to avoid losing the ECB chair.
There are 6 seats on the GC with the following incumbents: President Christine Lagarde (France), Luis de Guindos (Spain), Frank Elderson (Netherlands), Philip R. Lane (Ireland), Fabio Panetta (Italy) and Isabel Schnabel (Germany).