By Vittorio Hernandez

Rome, Italy

Italian Prime Minister Silvio Berlusconi prefers to have European Central Bank (ECB) Executive Board Member Lorenzo Bini Smaghi as the next governor of the Bank of Italy.

Berlusconi is expected to send a letter to the Italian central bank's supervisory board to nominate Smaghi to replace outgoing governor Mario Draghi, who is slated to become ECB president in November.

Draghi will replace Jean-Claude Trichet as ECB president.

Berlusconi also considered several candidates such as Bank of Italy's Director General Fabrizio Saccomanni, Deputy Governor Anna Maria Tarantola and Italian Treasury Director General Vittorio Grilli.

Draghi's successor will face the task of preventing the eurozone's debt crisis from further affecting Italian banks, which are regulated by the Bank of Italy.

Observers said that the failure by Italy to pick a governor is an indicator of internal crisis within the government, although Berlusconi's nomination may ease tensions with France.

French President Nicolas Sarkozy initially agreed to support Draghi's candidacy for the ECB in exchange for Berlusconi convincing Smaghi to resign from the ECB board to pave the way for a French member because when Trichet retires it would leave France without a representative in the ECB executive board. Smaghi refused to resign as board member before his term ends in 2013.

The decision to appoint a new governor belongs to Italian President Giorgio Napolitano.

As a member of the ECB board, Smaghi had questioned whether Italian banks needed larger capital infusions during the 2008 financial crisis and to ride out the eurozone debt crisis.

World - New Bank of Italy Governor Picked from European Central Bank | Global Viewpoint