SILVIO BERLUSCONI urged the head of Italy’s central bank to resign last night in an attempt to stave off a political crisis that threatens his centre-Right coalition.

The Prime Minister’s demand came after the resignation of Domenico Siniscalco as Finance Minister in protest at the refusal of Antonio Fazio to resign as governor of the Bank of Italy over charges that he abused his office by favouring domestic banks over foreign bidders attempting to gain a foothold in Italy.

Last night Signor Berlusconi, who had previously refused to condemn Signor Fazio, said that his continuing presence at the bank’s helm was “incompatible with the international credibility” of the country.

The Prime Minister acted quickly to replace Signor Siniscalco, appointing Giulio Tremonti, a previous Finance Minister who quit his post in the wake of a scandal in 2004.

The centre-left opposition said the moves came too late and called on Signor Berlusconi to resign and call early elections instead of waiting until May.

Marco Follini, leader of the Union of Christian Democrats, a Berlusconi coalition partner, called on him to hand over leadership to another candidate to avoid electoral defeat.

Romano Prodi, the centre-left leader and former President of the European Commission, said the crisis created “grave circumstances for Italian families and businesses”. Signor Berlusconi’s recall of Signor Tremonti was a “desperate measure” at a time when the centre Right was trailing badly in opinion polls.

Now a deputy prime minister, Signor Tremonti resigned in July 2004 after the Parmalat scandal, when one of Italy’s biggest companies collapsed.

Signor Berlusconi said that Signor Tremonti would represent Italy at the annual International Monetary Fund meeting in Washington today, which Signor Fazio is due to attend.

The IMF meeting, however, exposes Italy to embarrassment because Signor Tremonti is at odds with Signor Fazio.

Signor Fazio stands accused of covertly blocking Dutch and Spanish takeover bids for Italian banks. Appointed for life, he can be removed only by the Bank of Italy board. However, without Signor Berlusconi’s support, he appears doomed.

Signor Siniscalco quit after coalition squabbling over the draft budget. He accuses Signor Fazio of damaging Italy’s credibility through “cronyism”.

“I honestly could not take it any more,” he told La Repubblica. “The problem is not so much Fazio but the fact that the Government is incapable of resolving the problem. I’m not embittered, I’m scandalised.”

In Parliament, Francesco Rutelli, leader of the Margherita faction, said it was “time to bring down the curtain on this Government”. Piero Fassino, leader of the Democrats of the Left, the largest party on the centre Left, said that “the death throes of the Government must not become the death throes of Italy”.

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