Investors Watch for Italy’s Finance Chief: Here Are Some Options


One of the biggest decisions Italy’s new prime minister will have to make after Sunday’s election is who will become economy and finance minister, charged with steering the country’s fragile finances through an energy crisis and rising interest rates.

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(Bloomberg) – One of the biggest decisions Italy’s new prime minister will have to make after Sunday’s election is who will become economy and finance minister, charged with steering the country’s fragile finances through an energy crisis and rising interest rates.

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Markets want someone reliable to manage a historically weak economy burdened by high levels of debt. Choosing a new economic chief will be one of the first potentially risky moves for the new leadership.

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If Prime Minister Mario Draghi’s technocratic government falls, the prime ministerial post is likely to fall to Brothers of Italy’s Giorgia Meloni, who has little government experience. Their right-wing coalition includes Matteo Salvini’s Liga and ex-Prime Minister Silvio Berlusconi’s Forza Italia.

Here is a list of some candidates:

Draghi’s legacy

One option would be to leave a safe pair of hands on the job, capable of continuing the reforms and austerity that Draghi has initiated. The most obvious option in this case would be current Finance Minister Daniele Franco, 69. Under his leadership, the Italian economy grew by 6.6% in 2021 and the deficit level was kept under control.

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Draghi personally praised Franco last week and said he hopes the next government “will have a minister like him”. That fueled speculation that Franco might stay in place to steer the economy.

Market-friendly options

A similar choice would be Fabio Panetta, 63, currently a board member of the European Central Bank. His long career at the Bank of Italy and then the ECB makes him a reliable choice, especially at a time when bond yields are rising and an open dialogue with the ECB is seen as key to economic stability. Italian newspaper Il Foglio reported in July that Panetta briefed Meloni on the economic situation at a lawmaker’s birthday party in Rome. Still, Panetta may be tempted to avoid a Treasury role and wait for the Bank of Italy’s top post that will become vacant next year.

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Another scenario is that the new government appoints someone who is able to reassure international investors but does not get too close to the old government. One name making the rounds is Domenico Siniscalco, 68, a former finance minister and director-general of finance in conservative governments.

Lorenzo Bini Smaghi, 65, also a former ECB Executive Board member with a long career at the Bank of Italy, would also agree with this argument. Since then he has taught at Harvard University, among others, and has been CEO of the French bank Societe Generale since 2015.

party candidates

More coalition-friendly and potentially disruptive decisions include the appointment of current economic development minister Giancarlo Giorgetti, 55, in a nod to the Italian Brothers’ coalition partner, the League. In 2018 he was considered for the post of chief financial officer.

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Ex-Finance Minister Giulio Tremonti, 75, is also an option. He served under Berlusconi’s conservative governments as both minister and deputy prime minister, but is considered somewhat controversial and not on good terms with all members of the coalition.

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Another option would be to split the powerful ministry into an economy ministry responsible for the budget and a finance ministry responsible for fiscal policy. The two were separated in Italy until 2001 when they were reunited under Tremonti, so it would just be a throwback and in line with other euro countries like Germany.

This option is useful in a country with large and fractious coalitions like Italy, which allows more seats at cabinet meetings. It also dilutes power and potentially avoids tensions with the prime minister.

In this scenario, Maurizio Leo, 67, was proposed as an option for finance minister. He’s a Meloni man who worked on the party’s flat tax proposal.

Continue reading…

  • Italy’s next leaders face a bleak outlook as Draghi’s stint draws to a close
  • Italy’s Salvini wants $30 billion to help companies hit by energy prices
  • Italy’s growth will be jeopardized if Meloni repeals women’s labor law
  • Italy’s Meloni pledges not to widen deficit to fund energy aid

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