October 20, 2017 / 1:36 PM / a year ago

UPDATE 1-Italy's PM tries to quell divisions over central bank

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BRUSSELS, Oct 20 (Reuters) - Italy’s Prime Minister Paolo Gentiloni sought on Friday to quell a controversy over who will be the next governor of the central bank, an issue that has exposed divisions within the ruling Democratic Party (PD).

He said the bank should be independent but political opinions about it were legitimate.

The mandate of Bank of Italy Governor Ignazio Visco ends in October and the renewal of his 6-year term has been weakened by criticisms from PD leader and former prime minister Matteo Renzi.

Gentiloni, who has to recommend the next governor, has not indicated publicly his preference but stressed on Thursday that relations with the PD were “very good” and “all political opinions were legitimate”.

He also dismissed concerns that the support to the government could be weakened by the Bank of Italy debate, as the parliament prepares to discuss the budget for next year before elections by May.

Speaking in a news conference in Brussels, Gentiloni said the decision on the Bank of Italy will be made with the main aim of safeguarding the independence of the central bank, which oversees the country’s banking system.

The institution has been criticised for inadequate supervision as several Italian banks have collapsed in recent years.

“The government will take its decisions respecting the rules and the autonomy of the Bank of Italy,” Gentiloni told reporters after an EU summit in Brussels.

He declined to say whether the government will propose a new mandate for Visco or whether it will suggest a new name.

Italy’s president, Sergio Mattarella, who has to formally appoint the new governor, defended Visco after Renzi’s attacks . (Reporting by Francesco Guarascio; editing by Philip Blenkinsop/Jeremy Gaunt)

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