Italy's central bank governor, Antonio Fazio, won a round in his fight to keep his job on Friday when Prime Minister Silvio Berlusconi said the government was powerless to dismiss him over a bank take-over scandal.
Berlusconi said the government had no authority to move against the independent Bank of Italy despite growing calls from politicians for Fazio to step down over accusations that he showed bias against Dutch bank ABN Amro in the take-over fight.
"The Bank of Italy is autonomous and independent. Only the ECB (European Central Bank) can intervene, from this point of view. I think the government should not do anything more," Berlusconi told a news conference after a cabinet meeting.
"The government has no power in this regard." Berlusconi's comments ended speculation that he would launch a formal procedure, suggested by Economy Minister Domenico Siniscalco, to force the 68-year-old Fazio from office.
But Berlusconi said the powerful central banker could still be sanctioned by the Italian parliament or the ECB. Three of Berlusconi's most senior ministers have called on Fazio to resign after newspapers published police phone-tap conversations that showed he maintained a close relationship with the Italian bidder for Banca Antonveneta.
In an ironic twist, ABN Amro on Friday was on the verge of winning its fight against Banca Popolare Italiana for control of Antonveneta after months of bitter struggle that embroiled Fazio in controversy and changed Italy's financial landscape.
Berlusconi has remained neutral in the controversy over Fazio, wary of crossing a banker who has built a powerful base during 12 years in office and who denies any wrongdoing. The government's inability to move aggressively against Fazio has led to an unprecedented institutional stalemate with no obvious outcome.
When Berlusconi's cabinet passed reforms to the bank's structure last week, it carefully avoided touching Fazio, who has an open-ended mandate and does not answer to the government. The measures will only take effect under the next bank chief.
Economy Minister Domenico Siniscalco said the government had expected Fazio to take those reforms as a hint and stand down. If not, Siniscalco vowed to launch a formal procedure to oust him if not, an option Berlusconi dismissed on Friday.
Still, Fazio remained under pressure. He skipped a meeting of European Union finance ministers in Manchester, England, to avoid being on the same stage as Siniscalco, but still came under international fire.
"If you're asking me about Fazio's behaviour, it was anything but in the spirit of Europe," Austrian finance minister Karl-Heinz Grasser told reporters in Manchester, saying he backed Sinsicalco's stance.
"Every central banker and finance minister has to consider whether he is capable of functioning, whether he is credible and whether he benefits his institution. If Fazio asks himself these questions he should be able to come to a clear answer", he said.