The government chooses Panetta: he will lead the Bank of Italy after Visco. The interest rate challenge and the risk of the ECB

Fabio Panetta is ever closer to the highest seat of the Bank of Italy. As government and banking sources explain, today’s Council of Ministers will start the procedure for the succession of Ignazio Visco. And in pole position is the influential Italian member of the Board of the European Central Bank, Panetta. Already general manager of Palazzo Koch, Panetta was considered as the natural candidate to be the new governor of Via Nazionale. The trial, as pointed out by institutional sources a few weeks ago, was supposed to be completed before the summer. And so it was. Visco’s term will expire at the end of October and then, barring last-minute surprises, the Panetta era will begin.

“If confirmed, it would be a sign of continuity that is needed in this period,” commented an important European banker who requested anonymity. Fabio Panetta, born in 1959 and a PhD at the London Business School, is one of the most listened to policymakers of the Frankfurt institution. He joined the Bank of Italy in 1985, and in 1999 became head of its monetary and finance division. Then, in 2007, he became head of the Economic Conjuncture and Monetary Policy Studies Service. In 2012 he was appointed deputy general manager of the Bank of Italy. In 2019, he assumed the general management, as well as became president of the Institute for Insurance Supervision (IVASS). At the same time, he assumes the position of member of the Supervisory Board of the Single European Supervisory Mechanism. Finally, the turning point: on 1 January he took office as a member of the Executive Committee of the ECB. He charge that was marked by a pragmatic and gradual attitude.

Already last year, during the first round of interest rate hikes to combat inflation, Panetta had shown himself to be closer to an attitude of prudence and caution. Precisely to avoid an excessive deterioration of credit activity and therefore of economic expansion. A year on and after a 400 basis point rate hike, the weakening of economic activity in the Eurozone is clear. It will be seen within the next 18 months whether Panetta was right in requesting significant gradualness in the process of normalizing monetary policy, or whether there was an urgent need for a more aggressive stance in monetary tightening.

However, the closure of the match for the Bank of Italy, given that the outcome seems obvious, opens the doors for a replacement on the Board of the ECB. The practice is that the post is destined for an Italian, a country among the founding members of the EU. And in that case, the name that has been circulating with the most insistence for months is that of Piero Cipollone, a member of the Bank’s directorate and deputy general manager. But there are also those who see Daniele Franco, former Minister of the Treasury and former General Manager of Palazzo Koch, as well positioned. The impression of many observers is that in any case Cipollone will prevail. Even this decision, according to rumors, should arrive before the bank’s summer break.