Embattled Bank of Italy chief refuses to resign after humiliation in Washington

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The Independent Online

Mr Fazio has in recent weeks achieved the rare distinction of uniting Italy's political establishment, with the Berlusconi government and the opposition demanding his resignation after he was caught favouring Italian banks against foreign ones in takeover battles.

Denying all wrong, Mr Fazio has refused to quit - and thanks to the bank's autonomy, and his supporters on the board, he remains untouchable.

Devoid of a direct mechanism to push him out, the government resorted to the tactic of disgracing him on the international stage.

On Saturday, Giulio Tremonti, the Minister of Finance, and Mr Fazio, got through one day in each other's company at the joint World Bank/International Monetary Fund summit in Washington without exchanging a single word. The two men's hatred of each other is public knowledge.

Mr Tremonti was re-appointed finance minister last week after his predecessor Domenico Siniscalco, resigned after failing to persuade Silvio Berlusconi to come out with a public condemnation of Mr Fazio for his "Fortress Italy" policy towards foreign bank takeovers. The return of Mr Tremonti, 16 months after he was forced to resign from the same job, again in a row over Mr Fazio, has fuelled an explosive situation.

Mr Tremonti is in a far stronger position than before. Two years ago he was fighting a lonely battle to clip the governor's wings.

Today, the Italian establishment is arrayed against Mr Fazio: Mr Berlusconi condemned him the day after bringing Mr Tremonti back into the cabinet and the vice-prime minister Gianfranco Fini, the opposition leaders Romano Prodi and Piero Fassino, the president of Confindustria, Italy's equivalent of the CBI, and a majority of those working at the bank have called for Mr Fazio to go.

Only the Catholic Church, its political allies in the Christian Democratic parties and the Northern League still back him.

But Mr Tremonti has decided to kill his man by inches. On Saturday, he withdrew Mr Fazio's right to represent Italy on the World Bank's Development Committee, putting a more junior figure in his place. Mr Fazio had already prepared his speech but instead he made his apologies to his hosts and took a private Falcon 900 jet home.

Mr Tremonti described the notion that he had insulted Mr Fazio as "utter nonsense". Back in Rome Mr Fazio was bruised but unbowed, and defying demands for his resignation.

Mr Fazio has been in the firing line since the summer. For many years the Bank of Italy was the one Italian institution with an international reputation for fair dealing. Critics charge that Mr Fazio has turned it into a personal fiefdom, packing its board with loyal, under-qualified placemen and using his powers to favour selected Italian institutions and keep foreigners at bay. This at a time when the Italian economy is in desperate need of foreign investment.

The crisis at the Bank erupted when a Dutch bank, ABN Amro, complained Mr Fazio had unfairly blocked its attempt to take over the Italian Banca Antonveneta, in which it had a stake. In the course of the ensuing criminal investigation, Mr Fazio's phone was tapped.

The transcripts of conversations were later released to the Italian media, proving beyond doubt Mr Fazio's cosy relationship with a much smaller Italian bank, Banca Popolare Italiana, for which he was trying to engineer a reverse takeover of Antonveneta. In one conversation the head of Banca Popolare, Gianpiero Fiorani, expressed his joy at Mr Fazio signing the takeover papers in his bank's favour. "I've got goosebumps," he cooed. "I'd like to kiss your forehead."

In the latest twist to the saga, ABN Amro succeeded yesterday in its attempt to buy Banca Popolare's 40 per cent share in Antonveneta, giving the Dutch control.

The case against Fazio

* 1993

Antonio Fazio appointed governor of the Bank of Italy for life.


Italian dairy firm Parmalat collapses in Europe's biggest bankruptcy with billions of euro debts. Mr Fazio blamed for failure to see danger signs.

* 4 JULY 2004 Giulio Tremonti resigns as finance minister after failing to curb Mr Fazio's powers. Domenico Siniscalco replaces him.

* 30 MARCH 2005 ABN Amro launches takeover bid for Banca Antonveneta.

* 28 JULY

Pressure builds on Mr Fazio to resign after publication of bugged phone conversations in which he favours Italian banks.


Mr Siniscalco resigns as finance minister after government refuses to back him against Mr Fazio. Mr Tremonti reappointed finance minister.


Mr Fazio returns to Rome after being humiliated in Washington. Keeps his job.


ABN Amro buys controlling share in Banca Antonveneta for €3.2bn.