My recent assertion that things in Italy do, after all, get resolved turns out to have been rather naive. The governor of the central bank, Antonio Fazio, has not yet resigned and there seems to be no indication that he will do so anytime soon. As much as I blame the current Italian government for not taking a sufficiently unified and forceful line on Fazio, I am starting to be very annoyed about Jean-Claude Trichet's coyness and elusiveness on this issue:
Whatever the fate of Antonio Fazio, the rumpus over the head of the Bank of Italy’s handling of bank takeovers by foreigners has exposed potential weaknesses in corporate governance at the European Central Bank.In absence of all else, I guess we can at least be proud of having brought Europe-wide attention on the ECB's governance flaws. Additionally, the government recently did propose some reforms, though not very effective ones, considering that the governor will continue to be able to overrule the governing council. One consolation: if we get another gangster at the helm of the central bank he won't be able to do damage for more than seven years.
The ECB code of conduct, signed by all governing council members, imposes “a special responsibility to maintain the integrity and reputation of the European system of central banks”.
Yet, although Mr Fazio’s actions might well have risked the reputation of eurozone central banks, there has not been any sign that Jean-Claude Trichet, ECB president, considered this to be a real threat.
Part of the problem is that national central banks have a big role at the ECB, providing most of its 18-strong governing council. At the very least, there could be a perceived tendency to protect one of their own.
But who should keep an eye on the central bankers, given that so much value is attached to preserving their independence? When Ernst Welteke, former president of Germany’s Bundesbank, ran into controversy last year after accepting corporate hospitality from a bank he was regulating, the ECB expressed confidence in Bundesbank procedures. That was fair enough: the Bundesbank is collegiate and its president can be outvoted. At the Italian central bank, Mr Fazio has absolute power – the person is the institution.