MNI SOURCES: Law To Boost Political Control Over Bank of Italy

     LONDON (MNI) - Italy's government will present legislation to boost

political control over appointments to the Bank of Italy ahead of European

parliamentary elections later in May, in a move which has raised fears at the

central bank that its independence will be jeopardised, people close to the Bank

and officials at the right-wing League party told MNI.

     The proposed legislation could allow the government to appoint new members

of the governing board, subject only to approval by parliament, League officials

said. Under rules last updated in 2005, which also changed the composition of

the governing board, members are designated by the Bank's governor together with

the board of directors, before approval by the Council of Ministers and Italy's

president.

     "We need to revisit what independence means. The central bank's autonomy

does not and cannot automatically translate into self-referentiality," said a

top League official working on the reform proposal.

     Timing the legislation before the May 23 European vote should also

highlight the issue of central bank accountability, the official said.

     The League has regularly attacked the Bank of Italy, calling for it to work

in favour of Italian interests at the European Central Bank, and blaming it for

a string a bank failures. The party has also called for the ECB to be more

accountable to political leaders.

     The League recently grudgingly approved the nomination of two new external

board members, expressing its "reserve" at the appointment of Daniele Franco,

director of the Treasury's State General Accounting Department and a former Bank

of Italy official, and of Alessandra Perrazzelli, former country manager at

Barclays Italia.

     While people close to the Bank of Italy say the League's "reserve" has no

legal implications, they said it was intended as a way of pressuring the Bank's

management.

     The League's coalition partner, the Five-Stars Movement, has signalled

support for the changes to the rules on Bank of Italy governance, which the

League official said guaranteed its approval in both houses of parliament.

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

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