Bloomberg News

Bank of Italy’s Visco Nominated to Succeed Draghi as Head

October 20, 2011

(Updates with comments by economists in third, seventh paragraphs.)

Oct. 20 (Bloomberg) -- Bank of Italy Deputy Director General Ignazio Visco was nominated by Prime Minister Silvio Berlusconi to succeed Mario Draghi as the central bank governor, ending months of political bickering over the appointment.

Visco, considered a dark-horse candidate, was nominated in a letter sent by Berlusconi to the central bank’s Board of Directors, which provides a non-binding opinion before final approval by President Giorgio Napolitano, the premier’s office said in an e-mailed statement from Rome today. Draghi takes over from Jean-Claude Trichet as European Central Bank president on Nov. 1.

“It’s surprising,” said Riccardo Barbieri, chief European economist at Mizuho International Plc in London. Still, Visco, a former chief economist at the Organization for Economic Cooperation and Development, “has strong qualifications” and “an exceptionally broad skill set.”

Visco’s six-year term would start as Europe’s sovereign- debt crisis threatens to engulf Italy and Spain and to infect the banking sector of the 17-currency bloc. The nomination also ends a deadlock over Draghi’s successor that reflected divisions in Italy’s government at a time when Berlusconi is struggling to convince investors that he can tame the euro region’s second- biggest debt after Greece.

Bini Smaghi

ECB Executive Board member Lorenzo Bini Smaghi had been seen as the frontrunner for the post, a deputy minister who was informed of Berlusconi’s decision and declined to be identified said earlier today. Other candidates considered ahead of Visco were Bank of Italy Director General Fabrizio Saccomanni and Treasury Director General Vittorio Grilli.

Earlier this year, French President Nicolas Sarkozy had demanded that Bini Smaghi step down to avoid having two Italians and no Frenchman on the board after Trichet retires. Bini Smaghi has so far refused to give up his role at the ECB, where he oversees international relations, legal services and the Frankfurt-based central bank’s new premises project.

“The French obviously feel they should have a French member” on the Executive Board, “and this nomination doesn’t solve the problem,” said Marc Ostwald, a fixed-income strategist at Monument Securities Ltd. in London.

Record Yields

Visco, a Naples native, would take over at the central bank as the ECB continues to prop up Italian and Spanish debt markets to stem borrowing costs that surged to record highs amid concern that they may fall victim to Europe’s debt crisis. The yield on Italy’s 10-year bond reached 6.018 percent today, the highest since the before the ECB started buying Italian bonds on Aug. 8, as European leaders failed to agree on steps to end the crisis.

When EU leaders confirmed Draghi, 64, to succeed Trichet on June 24, Berlusconi pledged to nominate his successor the following week. Visco wasn’t among the three candidates he cited: Bini Smaghi, Saccomanni and Grilli.

Political bickering ensued. Berlusconi and Finance Minister Giulio Tremonti clashed over the appointment, with the premier backing Saccomanni and Tremonti preferring Grilli, Il Sole 24 Ore daily reported on Sept. 28. Grilli, who is from Milan, was also supported by Umberto Bossi, leader of the Northern League, which holds the key to Berlusconi’s parliamentary majority and whose power base is Milan.

Visco, 62, is one of three deputy directors-general at the Bank of Italy. He started his career at the central bank in 1972, holds a degree in economics from the University of Rome and a doctorate from the University of Pennsylvania. Between 1997 and 2002, he was chief economist at the Paris-based Organization for Economic Cooperation and Development.

--Editors: Jeffrey Donovan, Christopher Wellisz

To contact the reporter on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net.


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