After much discussion on the sidelines of the Euro-zone sovereign debt crisis, the Italian member of the ECB’s Executive Board, Lorenzo Bini Smaghi has resigned his position, finally opening the way for another French executive. This has been a long standing complaint of the Sarkozy who argues France is under-represented among monetary decision makers.
Under normal circumstances I would make nothing of it, but in the present credit environment faced by Italy, it is surely not unrealistic to wonder whether this was France’s price for supporting Italy’s needs in the months to come. This is clear in the figures below (thanks to Bloomberg), where the yields on Italian 2, 5 and 10 year sovereign debt are described.
However I don’t find that likely at all, considering their exposure to Italy ( this figure is a bit outdated, but it provides a good yardstick by which to consider the issue):
France is the most exposed creditor of Italy. It cannot credible threaten it with bankrupcy. Assuming that the Italian politicians knew that, and if I do I’m sure most of them did, Mr Bini Smaghi’s departure cannot have been determined by this issue. In the end, the deal must have been struck a long time ago in exchange for Mr Draghi’s presidency of the ECB.
May be now that he has less responsibilities, he can reconsider his position on European federalism…