Economic Hercules

Date: 05/03/1998

WHEN a television show conducted a phone-in poll on which Italian figures or symbols should be on the euro coins, a familiar list emerged:

Dante, Leonardo, Botticelli's Venus, the Colosseum - all reflections of Italy's past glories.

When a group of Italian journalists based in Brussels were asked who from modern Italy might be a candidate, a couple mentioned the name of Carlo Azeglio Ciampi.

Such is the reverence in which this spry 77-year-old is held in his country as the man who has almost single-handedly taken on the Herculean task of putting Italy's public financial morass into some sort of order in time for economic and monetary union.

Abroad, the importance of Ciampi's role in modernising Italy's fiscal position is acknowledged to the point where some question whether the dramatic improvement will outlast him.

Bundesbank president Hans Tietmeyer was paraphrased recently in an Italian newspaper as saying that he would only accept Italian membership of EMU if Ciampi agreed to stay at the treasury's helm for the next ten to15 years.

Ciampi has flatly denied that he will step down once he succeeds in getting Italy into EMU, and no one can deny his stamina as he flits from one international meeting to another. But, inevitably, many are asking just how long this septuagenarian can keep up his taxing work rate.

When asked recently if he had any plans to retire, Ciampi replied: “I have no intention of going anywhere, although I can't exclude that the Eternal Father will have other plans for me down the line.”

Ciampi is a leader without a political party - one of the tecnici who take the helm of Italian politics when the politicians fail to rise above their squabbling.

He is a former central banker who studied Greek at university, a national hero who drove trucks in Albania during the Second World War, a civil servant who has foregone his salary.

Although he gambled his reputation on Italy joining the single currency from the start, he has few other vices. Ciampi has a sweet-tooth for chocolate, but he does not smoke or drink.

His baker, Signor Virgilio, who owns a shop opposite Ciampi's unpretentious apartment building in northern Rome, describes him as “just another man on the street, very understated”. Yet, in the same breath, the baker adds that Ciampi and his wife Signora Franca, are “very clever, good organisers”.

But others see a different side of him. One treasury official described him as “a bit moody ... when it's a good day, he is very calm, easy to get on with. But when there's bad news, especially negative reports from abroad, then even his closest associates are terrified of him.”

If Ciampi is a gambler, he is a shrewd one. Shortly after he became treasury and budget minister in Italy's 55th post-war government, he bet his reputation that he would put the country's economy on a 'virtuous cycle'. If the Italian government could convince the markets that the country would be in the EMU starting line-up, then interest payments on its huge stock of debt would fall, so giving Rome a sporting chance of edging the budget deficit below the key single currency entry level of 3&percent; of gross domestic product.

The gamble seems to have worked. Ciampi admits that almost half of the four-percentage-point reduction in the country's deficit - from 6.7&percent; of GDP in 1996 to 2.7&percent; in 1997 - was the direct result of lower interest payments.

“The European Union is my guiding star,” the bushy-eyebrowed, snappily dressed Ciampi has repeated time and time again during his 21-month spell at the treasury. “Italy will be in the first wave of the EMU and stay there.”

Yet the man who dreamed of becoming a naval officer while growing up in the port city of Livorno, and who still enjoys rowing a small boat off the coast of Santa Severa, a beach town where he has a weekend home an hour's drive north of Rome, admits he did not always know his destiny lay in crunching numbers.

His academic background was steeped in the humanities, with a thesis in Greek literature from the prestigious Normale University in Pisa, a scholarship in German literature at the University of Leipzig and, after a stint in the army, a second degree in law.

Legend has it that when awarded the Knight of the Grand Cross of the Federal Republic of Germany in April 1996, Ciampi recited lines in German from the poet Rainer Maria Rilke and from Goethe's Faust with an impeccable accent.

In fact, this would-be man of letters entered the world of finance through the back door. Concerned about his precarious teaching position after graduating, he took an entrance exam for the Bank of Italy in 1946, reportedly at the suggestion of his wife, herself a bank manager's daughter.

He worked his way up from an administrator in local branches to become governor of the Bank of Italy and head of the foreign exchange office in 1979. From there, it was an uphill struggle.

During his 14 years as governor of the Bank of Italy from 1979 to 1993, Ciampi was famous for acerbic attacks on the government's public spending sprees and warnings about the consequences it could have for the country's credibility.

His darkest hour, as he himself has said, came in September 1992 when the Italian lira was forced to devalue and Italy was ejected from the European Exchange Rate Mechanism.

Ciampi's reputation emerged unscathed from the currency crisis, and he was called on seven months later, in April 1993, to head Italy's 52nd post-war government. It was at this point that he surprised everyone by refusing to draw his salary, saying that his pension as former governor of the central bank would suffice.

Apart from belonging briefly to the anti-fascist Partito d'Azione after the war, Ciampi has steadfastly refused to join a political party. “The only association I want to belong to is the boating club at Santa Severa,” he told the Italian newspaper Corriere della Sera.

Perhaps precisely because he is 'above it all', Ciampi was chosen to navigate the country through the troubled transition from the First Republic, whose principal players were swept away in corruption scandals, to what was hoped would be a more stable Second Republic.

Once described by the leader of the separatist Northern League Umberto Bossi as “the most English of the Italians, a man who knows the crooked from the straight”, Ciampi has been generally successful in winning plaudits from all sides, irrespective of political background.

Although his nomination as treasury and budget minister in the centre-left Olive Tree coalition was initially contested by the hard-left Refounded Communists (RC), on whose support the government relies for its lower house majority, he has managed to maintain their backing for drastic deficit reduction measures.

He has so far been able to rein in RC dissent, even after a recent slip of the tongue when he said it was “economic nonsense” to think the introduction of a 35-hour working week would boost employment.

Yet signs of fiscal fatigue are emerging.

He and his appointees, the so-called 'Ciampi boys', have come under attack for their unrelenting budget-cutting. Ciampi insists a stranglehold on public finances must continue in order to halve Italy's debt stock in the next 12 to 15 years.

Yet perhaps the most awkward clash of swords is between Ciampi, the self-proclaimed euro-enthusiast, and the man who succeeded him at the top of the Bank of Italy.

Antonio Fazio showed his true euro-sceptical colours at a recent parliamentary committee hearing when he said that for an Italy where product and labour markets were unreformed, EMU “would be more like purgatory than paradise”.

Ciampi retorted that even if EMU were “purgatory”, at least most Eu countries would be there too.

“And don't forget, purgatory is a lot better than the inferno, and that's where we will be if we don't make EMU,” he quipped.

9 Dec 1920: Born in Livorno, Italy

1946-60: Worked in branches of the Bank of Italy

1960-70: Economist and head of the bank's research department

1973-78 Secretary-general, deputy director-general then director-general at the bank

1979-93: Governor of the Bank of Italy, chairman of the Ufficio Italiano dei Cambi

1993-94 President of Italian Council of Ministers

1994-96 Vice-president of the Bank for International Settlements

1995-96: Chairman of EU competitiveness advisory group

18 May 1996- Appointed minister of treasury, budget and economic planning