Italy’s central banker. You might think about going now

Antonio Fazio proves hard to unseat

NOT since Rasputin haunted the family of the tsar has it taken so long to dismiss an unwanted courtier. Antonio Fazio, governor of the Bank of Italy, was this week still clinging indignantly to office despite all attempts to make him resign. The latest came from the prime minister, Silvio Berlusconi, who, after weeks of dodging the issue, intimated that he too thought the governor should go. Mr Fazio has been accused of unfairly favouring local bidders over foreigners in two banking takeovers. He denies any wrongdoing.

The affair has weakened the credibility of the Bank of Italy and revived suspicions of a cosy, protectionist culture in the Italian elite. That has implications not just for prospective investors in Italy, but also for Europe's single currency, which relies for success on increasingly free capital movement. The affair's political effects have been almost as big as the financial ones. It has highlighted the splits in Mr Berlusconi's coalition which frustrate decisions.

When the prime minister at last censured Mr Fazio this week, he used a Dickensian circumlocution: the verdict of his finance minister, Domenico Siniscalco, that the governor ought to go was a view (albeit a personal one) that could “in many ways” be “considered well-founded”.

Without changing the law, the government cannot sack the governor, who has life tenure. But it could make his position untenable, either by issuing an agreed statement calling on him to step down, or by exerting pressure on the council which appoints the governor and can, in exceptional circumstances, dismiss him.

So far, the government has done neither and, as so often, the problem is with the smallest of the four main coalition parties. Mr Fazio's key ally has been Umberto Bossi's Northern League. Xenophobic and protectionist, its leaders back his alleged efforts to shield local institutions. Both banks involved, Banca Antonveneta and Banca Popolare Italiana (formerly Popolare di Lodi), have northern roots.

Though short on electoral backing, the League is vociferous, and ready to wreck the coalition if it does not get its way. It enjoys much influence over Mr Berlusconi. He has long felt that his own party, Forza Italia, could face mass desertions if his government were seen to ignore the north, its fragile small firms or their bankers.

His, and the League's, reluctance to take sides against Mr Fazio explains why the government appeared to prepare a bill to get rid of the governor, then approved one that didn't. On September 2nd, the cabinet agreed to a new, seven-year term limit - but only for Mr Fazio's successor.

That and other measures to shift some powers from the central bank to the anti-trust authority and the stockmarket regulator are to be included in a bill, drawn up after the 2003 Parmalat fraud scandal, that is aimed at boosting investor confidence. But the bill's tortuous passage has largely had the opposite effect, and there is a risk that, made yet more complex by the new provisions for the Bank of Italy, it will not pass before the general election due next May. For the rest of 2005, the government will need most of its legislative time for the 2006 budget, and what's left is likely to go on a constitutional reform designed to satisfy the League's federal cravings. These demands on government attention also affect Mr Fazio's chances; for unless it acts soon, it could be too busy to act at all.