Land Without Shame

In today's Italy, public humiliation isn't what it used to be. No matter how badly you've behaved or how loud the calls for your resignation, just sit tight and ride out the storm. That appears to be the position of Antonio Fazio, the governor of the Bank of Italy, who is enmeshed in a scandal that smacks more of low melodrama than high finance. Unfortunately, it's not just Fazio: he represents a corrosive mindset that has crept into Italy's political and business culture over the past decade.

Fazio is in trouble because of his apparent partiality in a takeover battle between a Dutch bank and a local Italian one to control the prosperous, mid-sized Banca Antonveneta. It's an open secret that Fazio wants Italian banks to remain Italian, but as the governor of a serious central bank, he has an overriding responsibility to be fair and judge each case on its merits. And in this case, the Dutch suitor, ABN Amro, had two overwhelming advantages: unlike its Italian rival Banca Popolare Italiana (BPI), it played strictly by the rules and it actually had enough money to buy Banca Antonveneta. No matter. Thanks to judicious leaks, including the transcripts of tapped phone calls, the whole of Italy knows that Fazio overrode his central bank colleagues and egged on BPI's chief executive Gianpiero Fiorani, even to the extent of phoning him at home late one evening to tell him that he'd won the contest. "I could kiss you on the forehead," was Fiorani's classic B-movie reply.

The smooch would have been wasted: ABN last week acquired a controlling stake in Antonveneta, and regulators were crawling over BPI probing alleged breaches of Italian takeover rules. But if anything, that development only made Fazio's actions look more inappropriate. Fazio has been repudiated by much of the Italian business world, publicly ridiculed by Finance Minister Giulio Tremonti at a World Bank meeting and belatedly told off by Prime Minister Silvio Berlusconi. Whether or not he has broken any law, he has undoubtedly sullied the reputation of one of Italy's few credible public institutions. But thanks to the bank's Mussolini-era statutes, Fazio's tenure is for life. It's almost impossible to remove him from office unless he goes voluntarily. Don't hold your breath.

It's hard to believe that just a decade ago, Italy called its leaders to account in dramatic fashion. A handful of prosecutors in Milan led by Antonio di Pietro sparked a revolution by investigating the corrupt ties between business and politics. Dozens of heads rolled in the crackdown, known as mani pulite or clean hands, which led to a reshaping of the Italian political landscape. Among the biggest victims were former Prime Minister Bettino Craxi, who fled to Tunisia and stayed there until his death in 2000, and Raul Gardini, head of the Ferruzzi business empire, who shot himself dead. Some of the zeal of those years may have been overdone; many of those indicted were later acquitted. But today, it has been replaced by cynicism and apathy. Official investigations into allegations of corruption and other wrongdoing merely bring on a yawn, and amnesties are the order of the day for everything from tax evasion to illegal construction. "Italy is a land of extremes, and we have gone from one extreme to the other," says Stefano Caselli, a business professor at Milan's Bocconi University.

The result is a kind of national ethical fog. Take the Parmalat affair, Europe's biggest-ever business scandal. The dairy and food industry firm's founder, Calisto Tanzi, went on trial last week, charged with market rigging and false auditing. When the company collapsed 21 months ago, Italy was abuzz with talk of the need to introduce new tough regulations, akin to the strict corporate governance rules the U.S. enacted after the failure of Enron. In Italy, nothing of the sort has happened. "Unfortunately, we have had total inertia on this point," says Caselli.

Berlusconi is partly responsible for the changed mood. The business mogul-turned-politician has elevated conflict of interest to statesmanship. As Prime Minister, he has introduced a much shorter statute-of-limitations period for fraud cases. As a businessman, he was acquitted of fraud by a Milan court last week because the statute had kicked in. But the fault is not Berlusconi's alone. The mani pulite revolution turned into a circus of endless investigation and recrimination, and many Italians tired of it. Magistrates lost their hero status. Even Di Pietro ended up under investigation; he's now making a second try at a career in Italian politics.

Honor and accountability haven't died out entirely. Perhaps the most hopeful sign was given by Pierluigi Collina, Italy's most famous soccer referee, who was caught in a conflict of interest in August after he signed a sponsorship deal with Opel. Told to drop the deal or be relegated to refereeing second-division teams, he quit altogether. "In the end, all of us have lost," Collina said. "It's no use going on if there is no faith in the referee." Or the governor of a central bank.