Economy Minister Domenico Siniscalco said on Sunday he would "take institutional steps" to force Fazio's resignation "given that moral suasion hasn't worked."
He disclosed that the government had expected Fazio to stand down of his own accord after Friday's bank reform limiting the central banker's term of office. Siniscalco indicated this was intended as a clear message that Fazio should "make a gesture of institutional sensitivity" to help repair the central bank's battered image.
Now that Fazio has declined to fall on his sword it is up to the government to act, Siniscalco said. Siniscalco's statements came after he had been accused by Italy's biggest daily Corriere della Sera of "lacking backbone" in apparently letting Fazio off the hook.
The Economy Minister's renewed determination to get Fazio out is in line with Premier Silvio Berlusconi's latest statement on the case. Berlusconi said he expected Fazio's conscience to prod him towards the exit. Friday's eagerly awaited reform included a seven-year limit on the governor's term.
Government ministers indicated that the seven-year limit would come into effect only when there was a new Bank of Italy chief. Fazio, who has served six years, was therefore under no immediate legal obligation to resign - despite what many saw as a moral obligation.
Fazio has been at the centre of a political storm for weeks after he was accused of favouritism towards Italian banks during take-over battles involving two foreign competitors. There have been widespread calls for his resignation, with both the centre-left opposition and much of the governing centre-right coalition appearing to favour the governor's departure.
But Fazio has so far refused to do so, claiming he did nothing illegal.
The government has been under pressure to act quickly to prevent a further loss of credibility in international financial circles. It has been hamstrung by staunch support for Fazio from the small but influential Northern League party. The League appeared to have won the tussle between
government allies over whether the reform package should force Fazio out, as many in the government wanted.
"Fazio will do what he wants, but I don't think he has to resign," League minister Roberto Maroni said Friday. Siniscalco on Friday confirmed that the reform would only be applied to Fazio's successor and that it contained no measures to cover the transitional period. Initially Siniscalco had tabled a proposal which would have set an age limit of 70 for the Bank of Italy governor.
Fazio is 69.
The reform of the central bank also included a measure obliging the Bank of Italy to report to parliament and the government every six months. It keeps its brief to monitor the national banking system. According to the new text, it will "operate in compliance with the principle of transparency, the natural complement of its independence." Shares in Bankitalia capital will be held mostly by the state, with the remainder held by public bodies. Siniscalco said there would be a "gradual" passage of capital from private banks to the state.
