Antonio Fazio, the beleaguered governor of the Bank of Italy, has resigned as the scandal over the central banker's allegedly improper role in takeover battles for Italian banks threatened to reach the highest levels of Silvio Berlusconi's centre-right coalition.
Mr Fazio, 69, tendered his resignation to the Bank of Italy's eldest board member, Paolo Emilio Ferreri, bowing to several months of media and political pressure during which he had stubbornly clung to office. It was widely seen to be a move aimed at saving the central bank the embarrassment of having to sack him at a board meeting to be held today. In a brief statement, Mr Fazio claimed that "the decision was taken independently, with a clear conscience, so as to bring back serenity to the country and the Bank of Italy".
But his position had become untenable after it emerged last week that he was being investigated by Milan prosecutors for suspected insider trading as part of a wider inquiry into allegations of rampant fraud at Banca Popolare Italiana.
News of the inquiry persuaded many supporters to desert Mr Fazio and the Economy Minister Giulio Tremonti promised to introduce legislation before Christmas aimed at forcing him to quit.
The allegations of insider trading, first published in Friday's Corriere della Sera newspaper, dealt the fatal blow to Mr Fazio's chances of maintaining his position. He had suffered embarrassment earlier in the week with the arrest of Gianpiero Fiorani, the chief executive of the Banca Popolare Italiana, on 13 charges including market rigging and embezzlement from bank clients' accounts.
The long-running scandal involving the two men erupted last summer when the media made public transcripts of telephone conversations between them. These raised questions about the central bank governor's evident support for the Banca Popolare's failed takeover war with Dutch bank Amro Holding NV for Banca Antonveneta SpA.
Shortly after midnight on 12 July, Mr Fazio called Mr Fiorani to tell him that he had just approved Banca Popolare's takeover bid. "I have goose pimples," Mr Fiorani told him. "Thank you. I could kiss you on the forehead." The governor subsequently admitted receiving gifts worth tens of thousands of euros, but said these were part of Italy's normal gift culture between friends.
Mr Fazio's behaviour shocked many Italians who regard the Bank of Italy as a hallowed, uncorruptible institution. Even Opus Dei, the secretive conservative Roman Catholic movement to which Mr Fazio was known to be close, publicly distanced itself from him.
Investigating magistrates in Milan questioned Mr Fiorani for 10 hours on Sunday and he admitted that he and a group of cronies at the head of the Banca Popolare "had political protection". There is speculation that the affair could be the tip of an iceberg of a scandal on the scale of tangentopoli ("bribe city"), the corruption scandal that led to the arrest of hundreds of businessmen, politicians and civil servants in 1992 and precipitated the demise of the Christian Democrat and Socialist party's stranglehold on Italian political power.
The Corriere della Sera infuriated the prime minister's office with a front page article by the economist Francesco Giavazzi demanding Mr Fazio be dismissed by cabinet decree. Otherwise, he wrote, "there are those who would think the worst, suspecting that the reasons for which Berlusconi has been dithering for months will be clarified in the writs issued by the judges during the investigation of Fazio." Mr Berlusconi's office said the government's response to the crisis could not be dictated by "insinuations, threats or blackmail".
Several MPs from Mr Berlusconi's coalition have been exposed as enjoying generous overdraft or loan facilities at the BPI and have strenuously denied they were given credit in return for political protection.
Share values on the Milan stock exchange rose last night on optimism that the resignation may help to restore confidence in Europe's fourth-biggest economy.
The former EU competition commissioner Mario Monti, former European Central Bank executive board member Tommaso Padoa-Schioppa and Mario Dragi, former No 2 at Italy's Treasury, are possible replacements for Mr Fazio.Reuse content