Pier Carlo Padoan, chief economist at the Organization for Economic Cooperation and Development, was selected to be Italy’s finance minister as Prime Minister-designate Matteo Renzi named his government team.
Padoan, 64, was among the 16 ministers Renzi announced to reporters in Rome late yesterday. Half of the cabinet ministers are women, including 40-year-old lawmaker Federica Mogherini at the Foreign Ministry.
Padoan will oversee the equivalent of $2.84 trillion of public debt and take responsibility for Italy’s budget amid a growing backlash against fiscal austerity. An academic who also spent time at the International Monetary Fund, Padoan will become the country’s fourth consecutive finance minister from outside politics.
“Sometimes it’s easier to have a non-political finance minister to have a little distance and take a little of the heat,” George Papaconstantinou, who led the Greek Finance Ministry from 2009 to 2011 and previously worked as senior economist at the OECD, said in an interview.
Padoan and Renzi, 39, inherit a stagnant economy after three years in which their predecessors were mainly occupied with cutting the budget deficit and shielding Italy from bond-market speculation. Tax increases and spending curbs have reduced the deficit, while borrowing costs have dropped since the European Central Bank’s pledge to do whatever it takes to defend the euro helped ease the sovereign debt crisis.
Italian 10-year bond yields declined five basis points to 3.60 percent after falling to an eight-year low of 3.53 percent earlier in the week.
“We could have more growth in the euro area, and we need growth in the euro area with more support from the ECB, but also from the core countries,” Padoan said in an interview last week with Bloomberg Television. “Not just Greece, but also Germany needs to adjust.”
The appointment marks a return to government for Padoan, who served as economic adviser more than a decade ago to Prime Ministers Massimo D’Alema and Giuliano Amato. Padoan was Italian executive director at the IMF from 2001 to 2005 and joined the OECD in 2007 as deputy secretary-general, adding the role of chief economist in December 2009.
Padoan “will help Renzi make up for his young age, lack of international experience and macroeconomic management,” said Federico Santi, an analyst with Eurasia Group in London.
Renzi, the mayor of Florence since 2009, rose to power after winning leadership of the Democratic Party in December. He, too, lacks a national mandate from voters, even though opinion polls suggest he has broad support among the electorate.
President Giorgio Napolitano, 88, bypassed snap elections after Renzi brought down Enrico Letta last week.
Renzi will need to continually build consensus among his coalition if the government is to last until the legislature’s term ends in 2018. The Democratic Party needs the help of at least two other parties in the Senate to command a majority. When asked yesterday what he would do if turmoil within his coalition blocked the agenda he has promised to enact, Renzi indicated he would consider resigning.
“My word is more important than my career,” Renzi told reporters. “We are risking everything, but we’re doing it with determination, love for Italy and the conviction that this country has a period of beauty and enthusiasm ahead.”
Renzi reconfirmed Interior Minister Angelino Alfano, Infrastructure Minister Maurizio Lupi and Health Minister Beatrice Lorenzin in the roles they held under Letta. The Justice Ministry goes to Andrea Orlando, who served as environment minister under Letta. Federica Mogherini was named foreign minister, while Federica Guidi becomes economic development minister.
Ministers without an elected office, so-called technocrats, became more numerous in Italy with the intensification of the euro-area crisis in 2011. Politicians began looking for outsiders to help reassure markets and share the criticism for unpopular policies.
Mario Monti, the former European Union competition commissioner, took the job of finance minister for himself when he became premier in November 2011 and promptly raised taxes. Monti passed the job to his deputy, career civil servant Vittorio Grilli, in July 2012 as fiscal austerity continued. Fabrizio Saccomanni, the outgoing finance minister, was a top official at the Bank of Italy before his April 2013 appointment.
“The guy who sits in the ministry should be a politician,” said Riccardo Barbieri, chief European economist at Mizuho International Plc in London. “The government wants the Saccomanni of the day to take the heat for unpopular decisions.”
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