Operation Paris: Italy’s plan to stay on ECB executive board

June 11, 2019

By Giselda Vagnoni

ROME (Reuters) – Italy is ready to back a French candidate to lead the European Central Bank as part of its plan to ensure Rome retains a seat on the ECB executive board once Italian chief Mario Draghi steps down this year, a government source in Rome said.

Draghi ends his eight-year mandate in October and cannot be renewed in the job, potentially leaving Italy without board representation unless someone from France or Germany, the other big euro-zone powers already on the board, takes the top job.

According to unwritten rules, Italy, France and Germany are de facto entitled to seats but are allocated only one each on the six-member executive board.

If a French or a German were to succeed Draghi, either country would have to relinquish its existing seat, opening up an automatic vacancy for Italy.

Rome would prefer a French candidate – central bank chief Francois Villeroy de Galhau or current ECB board member Benoit Coeure – rather than Bundesbank chief Jens Weidmann to take the top job, the source said.

That is because of the German candidate’s previous criticism of ECB bond purchases. Buying up state bonds were part of Draghi’s “whatever it takes” stimulus drive that helped heavily indebted Italy through the global financial crisis.

“We will support a French candidate in order to get a seat for Italy,” said the source, who declined to be named.

However, the candidate considered most likely to clinch the top job is former Finnish central bank chief Erkki Liikanen or the incumbent Bank of Finland boss, Olli Rehn.

Given Finland is not currently represented on the executive board, that outcome could leave Italy out in the cold at least until end-2020 when the next vacancy comes up.

Any Italian-French deal over ECB seats would contrast with recently strained relations between the two countries.

Italy’s populist government has been an outspoken critic of centrist French President Emmanuel Macron. Paris recalled its Italy ambassador in February after the leader of one of Rome’s ruling parties met “yellow vest” anti-government protest leaders in France.

However, the government source said Rome was prepared to bury its anti-Macron rhetoric to clinch French support for continued Italian representation on the board, which plays a central role in setting interest rate policy for the 19-nation euro zone.

A recent Reuters survey of economists found that France’s Coeure was considered the best-qualified candidate.

(Editing by Mark Bendeich and Balasz Koranyi; Editing by Mark Heinrich)

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