Mario Draghi, an investment banker and former Treasury official, was named Bank of Italy governor on Thursday to succeed Antonio Fazio, who quit over a take-over scandal that tainted the country's image.
"The cabinet ... has approved the nomination of Professor Mario Draghi as governor," Prime Minister Silvio Berlusconi's government said in a statement. President Carlo Azeglio Ciampi was expected to formalise the appointment as soon as Thursday.
News that Draghi will lead the central bank was welcomed by politicians in Berlusconi's centre-right ruling coalition, eager to close the Fazio saga before it became a major problem before April general elections, as well as by the opposition.
Draghi, 58, has a wealth of international experience but faces arduous challenges following the bank take-over scandal which brought down Fazio, including rebuilding morale at what was once one of Italy's most revered institutions.
"It's a very good choice. The boost he will give to the country's credibility is more than any budget could do. We had touched the bottom in terms of credibility," said Francesco Giavazzi, economics professor at Milan's Bocconi University.
As Treasury director-general between 1991 and 2001, Draghi spearheaded sweeping privatisations in the energy, banking and telecommunications sectors and was in the front line of Italy's successful bid to join the European monetary union.
The new governor was expected to start his job in February, with acting governor Vincenzo Desario remaining until then.
Fazio quit last week, finally succumbing to months of pressure over his role in a bank take-over scandal that has thrown a spotlight on Italy's protected banking sector.
Draghi will be expected to be more active than euro-sceptic Fazio at the European Central Bank, where he will be one of 18 members who set interest rates for the euro zone.
A new law that the government rushed through parliament after Fazio quit put an end to the powerful governor's job-for-life status, setting a renewable 6-year term.