Italy’s finance minister. End of his tether

The day Domenico's patience ran dry

HE WAS a badge of respectability for Silvio Berlusconi's idiosyncratic administration and a guarantee for investors in both Italian securities and the euro. Domenico Siniscalco, a former academic and bureaucrat, ran Italy's finance ministry with skill and vigour, dissuading the prime minister from his more perilous adventures in the field of public finances.

But on September 21st, barely a year after entering the government, he submitted his resignation. Initially at least, this was not formally accepted. One newspaper quoted him as saying: “I couldn't take it any more.” His intended departure propels the conservative government into a renewed crisis, reviving demands from the opposition for a snap election, and calls from within the governing coalition for a change of leader.

Lagging in the opinion polls, Mr Berlusconi and his allies can be expected to agree on the need to resist an early poll. Unless they decide otherwise, balloting for a new parliament will not take place until next spring. But the prime minister's personal credibility, and his reputation for leadership, have been dealt a painful blow by Mr Siniscalco; and his partners are bound to be tempted by the promise of a clean break that offers them at least some prospect of salvaging the next election.

Mr Siniscalco had two motives for his move. The first was the government's handling of the bizarre affair of Italy's central bank chief, Antonio Fazio. He has been accused of conspiring to block attempts by a foreign bank, ABN Amro, to take over an Italian one. Wiretapped conversations published in the Italian press suggested the governor had a close relationship with ABN Amro's rival Italian bidder. Mr Fazio denies any wrongdoing and has repeatedly declined Mr Siniscalco's entreaties to step down.

The trial of strength between the two men was becoming increasingly embarrassing as they prepared to depart for Washington, DC for a meeting of the International Monetary Fund. But, said Mr Siniscalco, the real problem for him was the cabinet's reluctance to put pressure on Mr Fazio to go.

About that, “I'm not embittered - I'm scandalised,” he was reported as saying. The nuance is important. One reason why the government held back was because the Northern League, one of the parties in government, took Mr Fazio's side. There have also been claims - vigorously denied by Mr Berlusconi - that the bidder allegedly backed by the central bank governor had the prime minister's support too.

The other reason behind Mr Siniscalco's farewell - and the one that will concern the markets - was his difficulty in getting his 2006 budget approved within the government. His draft, calling for deficit-cutting measures worth more than €21 billion ($26 billion) was rejected by one of the coalition partners, the Union of Christian Democrats, and many in government are known to feel such an austere budget would ruin their remaining chances of re-election. The danger clearly raised by Mr Siniscalco's resignation is that, with their eyes fixed firmly on polling day, the spenders will get the upper hand. The 2006 budget must be approved by the government by September 30th, so time is pressing.

Domencio Siniscalco resigned as Italy's Finance Minister on 21 September 2005.