ECB board: It’s a predicament mixing principles and realpolitik in a peculiarly European fashion. The ECB might end up with two Italians on its six-strong board if and when Mario Draghi takes the top job, because his fellow countryman Lorenzo Bini Smaghi is refusing to resign to make way for a French national.
In a highly unusual manner, the Italian government has publicly asked Bini Smaghi to step aside, invoking the spirit of rules governing the monetary union. Since the euro’s creation, each of the euro zone’s major powers has had a representative on the board. Should Bini Smaghi hang on to his role, the French would be left without one.
Bini Smaghi is right in principle. If any government forced him to resign before the end of his eight-year term, in 2013, it would be perceived as a blow to the ECB’s independence. ECB executive board members, after all, aren’t supposed to represent their governments.
Nicolas Sarkozy may now regret endorsing Mario Draghi for the ECB president before he won firm assurances on a wider deal from Silvio Berlusconi. There’s little Sarkozy can do now - he can’t renege on his warm support for Draghi, even if others, including Germany, are uncomfortable at the prospect of Italian over-representation.
The best solution would be for Rome to appoint Bini Smaghi as head of the Bank of Italy, to replace Draghi. But the Italian government doesn’t want this to happen - it is this that caused the crisis in the first place. It seems that Berlusconi favours Fabrizio Saccomanni, the Bank of Italy’s long-serving general director, while finance minister Giulio Tremonti supports Vittorio Grilli, Italy’s treasury minister.
The first man would be appointed on account of seniority, the second on account of proximity. Bini Smaghi, on the other hand, has the best credentials for the job, and has been one of the ECB’s fiercest hawks. His appointment would demonstrate that the Italian government is serious about the central bank’s independence, and intent on keeping national balance on the ECB’s governing body.