Italian finance minister quits

ITALY'S Finance Minister Domenico Siniscalco sensationally resigned yesterday after he failed to persuade Bank of Italy Governor Antonio Fazio to quit.

The move, which leaves the government without a finance chief days before the presentation of the budget, came less than a month after Mr Siniscalco first called for Mr Fazio to go. He said evidence that the banker had favoured an Italian bank over a foreign lender in a takeover fight was "devastating" to Italy's credibility. The case led the ECB and the European Commission to scrutinise Mr Fazio's oversight of the Italian banking market.

The departure of Mr Siniscalco, a political independent, may make the four parties in Prime Minister Silvio Berlusconi's coalition less willing to deliver on pledges to cut over €10 billion from the deficit.

Support for Mr Berlusconi has been sliding, and opposition leader Romano Prodi yesterday said the resignation should prompt early elections.

"The question now is about the budget, and the government doesn't know how to handle it," Vincenzo Visco, a former finance minister of the largest opposition party, the Democrats of the Left, said in an interview. "If Siniscalco had wanted to resign strictly over the Fazio case he would have done it two weeks ago."

Mr Siniscalco, 51, took on Mr Fazio after prosecutors uncovered evidence the central bank head favoured Banca Popolare Italiana's bid for Banca Antonveneta that blocked ABN Amro Holding NV's €5.8 billion offer. The Dutch bank is now poised to complete the first foreign takeover of an Italian bank after a criminal probe led regulators to suspend the rival offer.

"I'm resigning because of the government's absolute immobility," Mr Siniscalco said in his resignation letter to Berlusconi, Italian newspaper Corriere della Sera reported. "The problem is not so much Fazio as the people who are incapable of resolving the question."

Mr Siniscalco would be the second finance minister who tried to remove Mr Fazio to resign in 14 months. Giulio Tremonti, his predecessor, quit in July 2004, partly because of the fallout of his attempt to force Mr Fazio out over the Bank of Italy's oversight of lending to Parmalat Finanziaria, which collapsed in Italy's biggest bankruptcy in December 2003.

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