By Francesco Canepa and Giselda Vagnoni
FRANKFURT/ROME (Reuters) – Italy is unlikely to get one of its own appointed as the next head of Europe’s banking watchdog, sources say, diminishing Rome’s chances of retaining its influence over the European Central Bank once ECB chief Mario Draghi steps down next year.
The ECB is looking to replace Daniele Nouy, a French national, as the head of the Single Supervisory Mechanism (SSM) — the first of four top jobs at the central bank coming up for grabs in the next 15 months.
Nouy’s successor must be chosen by year-end. Although a shortlist has not yet been drawn up, Irishwoman Sharon Donnery is seen as the front-runner after winning Germany’s backing, conversations with seven sources close to the matter showed.
A spokesman for the ECB declined to comment.
The other two known candidates are the Italian head of the European Banking Authority, Andrea Enria, and French market regulator Robert Ophele.
With Enria’s chances seen dimming, Italy could also find itself without a seat on the ECB’s six-member Executive Board for the first time since the introduction of the euro when Draghi’s term as ECB President expires in October 2019.
This would undermine Rome’s sway over the euro zone’s most powerful institution at a time when it may need support.
Italy has the second highest public debt in the euro zone, its borrowing costs have been rising since an anti-establishment coalition government took power in June, and its banks are still struggling with the legacy of the last economic crisis.
During Draghi’s tenure, the ECB has taken bold steps to shield indebted countries like Italy from market speculation and adopted ultra-easy monetary policies that helped revive their battered economies despite German opposition.
“The current situation is unique … and can’t be replicated,” one of the sources said.
ISOLATED
Another source said Rome was “isolated” within the SSM after it forced Nouy to partially water down proposals to reduce the burden of bad loans on banks’ balance sheets — a big problem for Italian lenders.
While Enria has a reputation for independence from his country’s interest, Rome’s inability to forge alliances may cost him dear.
The head of the SSM is proposed by the ECB after a competitive application process, but the appointment is made by the heads of EU governments as part of a broader chess game to distribute top roles among countries.
Frictions between Italy’s populist government and influential partners such as France on issues like migration were making it difficult for Rome to forge alliances, three sources said.
Suggestions the government might implement policies that would increase debt and breach EU fiscal rules had also irritated some within the bloc, although ministers have now promised to keep public finances in check.
“The chance of Enria getting the job are very low, below 30 percent,” one Italian source said.
Enria did not respond to requests for comment made through the EBA and an EBA spokeswoman did not immediately provide comment.
Missing out on the SSM’s top job would be a blow for Rome as it may also soon lose its seat on the Executive Board, which runs the ECB and makes policy proposals.
Unless a German or Frenchman replaces Draghi, freeing up a seat for Italy, Rome may have to wait until France’s Benoit Coeure steps down in December 2019 or Luxembourg’s Yves Mersch almost a year later.
France has already had an ECB President and the German government is focusing on securing the presidency of the European Commission, according to recent reports in Italy’s daily Il Sole 24 Ore and Germany’s Handelsblatt.
One of the sources cautioned it was still too early to draw any clear conclusion and the need to keep a balance between different countries in the way top European Union jobs are handed out could yield “a different, hard-to-predict” outcome.
Source: Investing.com
