ECB member Smaghi rejects French pressure to go

17th June 2011, Comments 0 comments

A top executive at the European Central Bank, Italian Lorenzo Bini Smaghi, rejected pressure Friday for him to resign to make way for a French official.

But French President Nicolas Sarkozy insisted that under an unwritten rule the big countries in the eurozone such as France were assured a seat on the executive board at the ECB.

Smaghi told the newspaper Corriere della Sera that the Maastricht treaty which created the eurozone assured the independence of the bank and of its staff.

"In Europe, it is the Maastricht treaty which defines and protects the independence of the ECB and national banks," Smaghi said before meeting Prime Minister Silvio Berlusconi, who has requested his resignation.

"But other than operational, institutional and financial independence, there is also the independence of personnel, which guarantees they may remain in their posts in decision-making bodies for the full term of their appointments and protects them against arbitrary dismissal."

Berlusconi wants Smaghi to step down to make way on the executive board for a representative from France, which supported Italy's Mario Draghi as the next ECB president later this year.

As things currently stand, when ECB President Jean-Claude Trichet stands down later this year France will no longer have a representative on the bank's executive board while Italy would have two.

Speaking in Berlin, Sarkozy said that he had "no reason" to doubt that Italy would honour its word to obtain Smaghi's resignation.

"Italy has given its word," he said. "Even if the career paths of people are absolutely fascinating, they are all the same less important than the general interest."

Sarkozy said: "There is a rule, which is an unwritten rule, which everyone knows and which says that among the six members of the ECB board it is in the interest of the ECB to see the big countries represented."

He argued that the situation of having two Italians on the board of six "would not be an extremely European solution."

The separate governing council of the ECB, which determines monetary policy, comprises the governors of central banks from eurozone countries.

Smaghi declined to comment after his meeting with Berlusconi.

In an earlier conference at the Vatican, Smaghi invoked Sir Thomas More, executed for defying English King Henry VIII and later canonised by the Catholic Church, as a symbol for central bankers.

More, "with his independence of judgment and firm conviction in the supremacy of the public interest succeeded in resisting the pressure of Henry VIII -- to whom he was the closest advisor before being named chancellor -- until he was forced to resign, incarcerated and condemned to death."

Appointing Smaghi to replace Draghi as the head of the Bank of Italy has been one widely floated solution, although the Italian press said candidates supported by Draghi and Economy Minister Giulio Tremonti had better chances of getting the job.

At Deutsche Bank in Germany, economist Gilles Moec commented that Trichet had made clear his view that board members could not be forced out for political reasons.

But, Moec commented, the non-representation of a big eurozone country would "pose a problem" even though the members of the board represented the eurozone and not their countries of origin.

© 2011 AFP

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