MNI SOURCES: Italy Confident Of Gaining ECB Board Seat

By Silvia Marchetti and David Thomas

     ROME/BRUSSELS (MNI) - The Italian government is confident Italy will

inherit a seat on the European Central Bank's executive board when Benoit

Coeure's term ends in December despite Italy's snagging another key EU job,

sources told MNI, but officials in Brussels cautioned that Rome should not count

its chickens before they hatch.

     The appointment this week of Paolo Gentiloni as Economic Affairs

Commissioner might tempt some countries to argue that Italy now has its fair

share of top European Union appointments, one northern country source, close to

the Eurogroup of European finance ministers, told MNI.

     "It might encourage others to put forward a candidate with a bit more

conviction than they otherwise would have done. The Netherlands and Finland

might point out, for instance, that it has been some time since they occupied a

seat on the board," the source said.

     France's Christine Lagarde will replace Mario Draghi as ECB president from

November 1, leaving Italy without representation on the ECB's board. Rome

believes that as one of the bank's biggest stakeholders and the third-largest

European economy it should then inherit the Market Operations department

currently run by Coeure. The Eurogroup of eurozone finance ministers will open

the call for applications for his role at its informal meeting in Helsinki this

weekend, with a decision coming in October.

     Another EU official, close to preparations for the meeting, noted that

there was no rule allocating big member states a seat on the ECB's executive

board.

     "The big countries do insist on the rule, but the smaller countries always

argue that there should be some kind of rotation and then there are the Eastern

European countries who point out that they have not yet had a member of the

board at all," the official said.

     "The last couple of times there has generally been more than one candidate,

so I would always caution against this process being pre-cooked."

     A source within Italy's Democrat Party, which has formed a coalition

administration with the 5-Stars Movement, returning Italy to the EU's good books

after the departure from government of the far-right League, said that the ECB

had always made special allowances for bigger countries.

     "Rome will get for sure a new member for Italy when Draghi steps down," the

Democrat official said, referring to the executive board slot.

     When Draghi was nominated ECB chief in 2011 then executive board member

Lorenzo Bini Smaghi stepped down as there could only be one Italian, the

official recalled.

     "Two board members from the same country is out of the question, but so is

none when it comes to Italy," said a 5-Stars Movement source.

     One potential candidate to replace Coeure is current Bank of Italy Senior

Deputy Governor Fabio Panetta, a member of the ECB's bank supervisory arm, who

has called for a revision of rules on bailing in bond holders when banks run

into trouble and easier regulations on non-performing loans.

     Also at the Helsinki meeting, ministers will debate streamlining and

simplifying the Stability and Growth Pact - something long called for by Italy.

     "The revision of fiscal rules must not be drastic, nobody in Europe wants

to totally dismantle the Stability and Growth Pact but to make it simpler and

more efficient," said the Democrat source. "There's growing support for a more

expansive fiscal policy across the euro zone with both Lagarde and the new EC

head von der Leyen recently opening up to a new, less austere stance."

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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