Fazio wins a round in fight to keep job

Italy's central bank governor, Antonio Fazio, won a round in his fight to keep his job yesterday when Prime Minister Silvio Berlusconi said the government was powerless to dismiss him over a bank takeover scandal.

Mr Berlusconi said he had no authority to move against the independent Bank of Italy despite growing calls from politicians for Mr Fazio to step down over accusations that he showed bias against Dutch bank ABN AMRO in the takeover 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," Mr Berlusconi told a news conference after a Cabinet meeting. "The government has no power in this regard."

Mr Berlusconi's comments ended speculation that he would launch a formal procedure, and came as a blow to Economy Minister Domenico Siniscalco who had wanted the government to move to force the 68-year-old Mr Fazio from office.

The government's inability to move decisively against Mr Fazio, who has an open-ended term in office, has led to an unprecedented institutional stalemate with no obvious outcome.

Mr Berlusconi said the powerful central banker could still be sanctioned by the Italian Parliament or the ECB, where Mr Fazio sits on the policy-setting Governing Council.

But the powers of both those bodies over the independent central bank are limited.

ECB President Jean-Claude Trichet refused to be drawn into the row. "I've said this before and I'll say it again - we are monitoring very carefully just what the situation is today," he told reporters at a meeting of European Union Finance Ministers.

The ECB is reviewing a dossier Mr Fazio gave to the government last month justifying his handling of the bank takeover bids, but its statute only provides for the dismissal of a governing council member who has been found guilty of serious misconduct.

Mr Fazio is not under investigation in Italy.

Italian media have speculated that Mr Siniscalco would himself have to resign if Mr Fazio did not, but the minister played down the row, allying himself with Mr Trichet's non-committal stance.

"I share the balanced position of Trichet, who says everyone has their own responsibilities: the ECB, which the Bank of Italy is part of; the Italian parliament and government, and the Bank of Italy itself," Mr Siniscalco told reporters at the EU meeting in Manchester, England. Mr Fazio skipped the Manchester meeting at the last minute to avoid an embarrassing joint appearance with Mr Siniscalco.

Austrian Finance Minister Karl-Heinz Grasser dropped the diplomatic language and launched a savage attack on Mr Fazio who he said had acted "against the spirit of Europe".

"Mr Fazio has absolutely no influence over the euro and the esteem in which the euro is held, thank God," he told reporters.