Italy may find no place in euro monetary committee

Absence could be used by Italian politicians to rail against Eurozone policies

Italy could soon find itself excluded from the heart of Euro-area monetary policy for the first time in the currency’s two-decade history.

European Central Bank President Mario Draghi’s eight-year term ends in October 2019 and his country has no automatic path to a seat on the Executive Board after that.

Instead, its populist leaders must negotiate with the same European governments that they’ve antagonised on issues including spending limits and immigration since coming to power in June.

The risk is that excluding the currency’s third-largest economy — and a founding member of the European Union — from the body that originates monetary policy would be seen as a snub by Italians.

Some officials have already flirted with Euro-scepticism and investors remain concerned that the administration might yet consider leaving the bloc, causing a full-blown financial crisis.

“It would make it easier for populists to construct a narrative where they have no voice, the ECB is far away in Frankfurt,” said Nick Kounis, an economist at ABN Amro Bank NV in Amsterdam. “It would be all about perception.”

While the ECB’s 25-member Governing Council, including Italian Governor Ignazio Visco, ultimately decides on monetary policy, the six-member Executive Board makes proposals and sets the agenda. Draghi’s presidency since 2011 means it’s unlikely another Italian would replace him when his non-renewable term finishes.

The neatest solution might be for Germany to get the presidency for the first time, German board member Sabine Lautenschlaeger to quit, and an Italian to take her place.

But Chancellor Angela Merkel is reportedly focusing on a senior EU political post for her country rather than pushing Bundesbank President Jens Weidmann for the ECB.