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The race to govern the Bank of Italy is on (POLITICO)

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ROME — Massive and imposing, Italy’s central bank looms behind a barbed perimeter of black iron and angular palm trees on the via Nazionale, minutes from Rome’s famous ancient heart.

Built to project the economic potential of the new Italian state in the late 19th century, its grandeur seems at odds with its status as only one of 20 national central banks of the eurozone. But while it no longer makes Italian monetary policy, it remains one of the country’s most influential political and economic power-brokers.

It has the ear of both the president and the government. When it pronounces on the big monetary and fiscal matters of the day, inexperienced government ministers and civil servants listen with reverent attention. Its prestige gives it the power to bat down policies it doesn’t like, as it did recently with the government’s proposed flat tax.

“It is a supremely powerful economic think-tank,” says Francesco Galietti, a former Treasury official, now head of the consultancy Policy Sonar.

That power only increases the urgency of this year’s big question: who will succeed Ignazio Visco, the softly-spoken governor whose 12-year reign is set to end in October? Nobody has yet formally admitted that they want the job, nor have the politicians tasked with nominating a candidate publicly hinted yet at which way the wind might blow.

By law, the governor is appointed by the president on the recommendation of the council of ministers. Tradition suggests that the candidate may well come from the bank itself, not least because the vulnerabilities of Italy’s economy and its banking system demand that the Governor be an accomplished technocrat. But whoever takes power will also have to dance a sophisticated political tango, appealing at once to Italy’s financial elite, the president, and its right-wing premier, Giorgia Meloni.

A quartet of deputies

The field spans career bankers, financiers with obscure political motives and understated wild-card candidates. Any of the bank’s four deputy governors may become contenders, although none has the advantage of being affiliated to the ruling wing of Italian politics. Alessandra Perrazzelli is a centrist protégé of former finance minister Carlo Calenda; Paolo Angelini, a longtime bank veteran, is a scholar-bureaucrat; Piero Cipollone, a consummate bankman who served a stint advising former left-populist premier Giuseppe Conte.

The Florentine Luigi Federico Signorini, the fourth deputy, would typically be the “ideal” candidate, several officials say. His extensive experience in banking supervision is a huge asset for a post that oversees one of the eurozone’s key pressure points. But his liberal, pro-market politics put him at odds with the current administration. A friend described him as a “staunch anti-populist,” anathema to Meloni’s interests.

The “outsider” candidates, meanwhile, include Renato Brunetta, a former Berlusconi deputy, and Luigi Buttiglione, a right-wing former investment banker who has been linked (though he denies it) to the ruling Fratelli D’Italia party.

By common consent, however, the person best positioned to reconcile all the various conflicting interests is Fabio Panetta, a former deputy governor under Visco who now sits on the European Central Bank’s board.

A career technocrat who has served three bank governors, Panetta is ideal for a government that aches to be seen as a moderate force in Europe. He is also amenable to Meloni, both politically and personally. An acquaintance describes him as an “expansive” and affable Roman who shares Meloni’s links to Catholic conservatism.

“They are also the closest ideologically,” agreed one former high-ranking government official.

Bank of Italy and government officials POLITICO spoke to all agree that Panetta is in “pole position”. That matters, as the bank traditionally has a big say in who gets to lead it.

The question, however, is whether Meloni will risk recalling Panetta from Frankfurt if that puts in play Italy’s place on the ECB board, where Panetta is a critical ambassador for the country’s interests.

The basic calculus articulated by multiple former and current officials at the bank is that if Meloni can guarantee a replacement in Frankfurt, Panetta will become governor; if she can’t, she’ll have to choose another.

Can Meloni forgive a snub?

Already Panetta’s candidacy has been buffeted by politics. Many say he would already be governor, had it not been for a public dispute between the bank and then-Prime Minister Matteo Renzi over the collapse of two savings banks in the Veneto region in 2017. Renzi’s criticism of Visco’s handling of the affair forced President Sergio Mattarella to defend the bank’s independence, which he did by engineering Visco’s reappointment for another six-year term. The Frankfurt job was effectively Panetta’s consolation prize.

Last year, he rejected Meloni’s offer to be Minister of Finance, supposedly because he wanted to stay at the ECB and knew he would likely be made governor anyway, according to people who know him. That means it is less a matter of him vying for the job than of Meloni herself winning him over. “Panetta is not Meloni’s man — Meloni is Panetta’s woman,” said Stefano Cingolani, a writer for Italian daily Il Foglio and a seasoned observer of Italy’s central bank.

Meloni must be mindful of previous, over-mighty governors who outlasted their political sponsors. Before Visco was Mario Draghi, who negotiated behind the back of the man who appointed him, Silvio Berlusconi, in a quasi-coup that led to the then-premier’s resignation (and, in fairness, ended a speculative episode that threatened to push Italy out of the currency union).

And yet it is also vital, in a country of generally short government lifespans, that the new governor have the authority to forge compromises capable of surviving political volatility. That anchoring role was pioneered in the 1990s by the formidable Carlo Azeglio Ciampi, the first in a long line of bankers — including Draghi — who would be parachuted into higher office amid political chaos.

If things don’t work out with Panetta, the debate will shift to the “back-up cards,” according to one bank official.

In Rome, that means either Signorini or the reserved, bespectacled Daniele Franco, described in Italian media as the “sphinx of the Dolomites.”

Franco was director-general of the bank in 2020-2021 and then Minister of Finance under Draghi in 2022. While that may have cost him valuable status as an independent, he maintains good relationships with the government, the bank, and the president.

Like Panetta, Franco also publicly rejected an offer in 2022 to be finance minister under Meloni, with a friend saying he didn’t want to be seen as a Talleyrandian figure interested only in power.

But a stomach for wielding power is indispensable. In countries where governments are often weak, other institutions expand to fill the power vacuum — especially when headed by as savvy an operator as Draghi, who is now talked of as the country’s next president. Whoever does take over from Visco will have every right to dream of greater things still to come.

Additional reporting by Hannah Roberts

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