With an Italian — Fabio Capello — now firmly ensconced as the England football manager (for the time being at least), and the comings and goings between new partners, the London Stock Exchange and its Italian counterpart now an established traffic flow, it seems British-Italian relations have never been better.

Tommaso Padao-Schioppa, Italy’s Finance Minister and policy committee member at the IMF, was guest of honour at the LSE’s Christmas lunch, we hear. As befits a 300-year-old institution, the wine cellar is generally reckoned to be superb.

However, an off note was struck amid this glutinous festive cheer when the Minister scolded Borsa Italiana for not bedding down with NYSE Euronext or the German exchange, Deutche Borse.

The name of the new group’s holding company will be London Stock Exchange — anything else would have downgraded the reputation of the new combine. It is also a fact that over 30 percent of Borsa’s trades come from London based investment banks.

It’s easy to see why the deal made more sense to the Milan bosses than a eurozone one, apparently favoured by the politician. Sr. Padao-Schioppa did concede, however, that mild disapproval of a marriage is often a good incentive to make it work.

Let us hope so.

NYSE-Euronext suffered its first major setback last week as CEO John Thain, 52, looked poised to replace Stan O’Neal as boss of Merrill Lynch.

Wall Street was shocked at the news as Larry Fink had seemed quids in for the post. Thain was formerly President of Goldman Sachs.

The move leaves a hole at the top of stock exchange group NYSE-Euronext as the man who forged the transatlantic merger jumps ship.

Chief operating officer Duncan Niederauer looks poised to take control.

Merrill’s share jumped 5 percent as Wall Street absorbed the news.

The London Stock Exchange (LSE) is in the process of finalizing an agreed £1.1 billion ($2.1bn) all-share takeover of Borsa Italiana, the Milan stock exchange.

The TimesBusiness is reporting : “The board of the Borsa was locked in a second day of meetings, but unofficial indications were that agreement had been reached. The LSE is prepared to offer 4.9 of its shares for every one in the Borsa.”

That does seem to be a whopping price to pay for the seventh largest exchange in Europe, but clearly Clara Furse is getting her retaliation in first to beat off counter offers from New York or Frankfurt.

The merger will create Europe’s biggest exchange read from the value of companies listed there, with around half of the FTSE Eurofirst 100 listing.

The two exchanges will be owned by one company headed by Clara Furse, LSE’s chief executive. Her Italian counterpart, Massimo Capuano will become her deputy.

We also hear that the Borsa will have five seats on the board to London’s seven, giving the Italians far greater presence than the sizes of the two exchanges would suggest.

London is capitalised at £2.7 billion, against just over £1 billion for Borsa Italiana.

A formal confirmation of the agreed offer could come on Monday morning. It would leave the two New York exchanges in a quandary. The New York Stock Exchange is now merged with Euronext, operator of four continental markets, and Liffe, the financial futures market in London. The merged group has expressed an interest in buying the Borsa but has yet to table a formal offer and will now have to decide if it can trump the London terms.

By diluting the Nasdaq holding from 30 percent to 20, the merger will make it more difficult for the Americans to bid again in January.

Milan and London will continue to be operated separately under the terms of the agreement, but the LSE is expected to concentrate on the benefits of becoming a larger player on the world stage

Clara Furse is also expected to emphasise the attractions of MTS, the government bonds trading platform. The Borsa has already moved to take control of the platform this week, and it could boost the LSE’s capabilities in the derivatives market where it is weak.

“Tommaso Padoa-Schioppa, the Italian Economy Minister, pledged support for a Milan-London link last night, describing it as ‘a very positive accord because it creates a very strong international presence’. ”

A new wave of exchange consolidations seems imminent, following Nasdaq’s £1.9bn ($3,7bn) agreed bid for Scandinavian group OMX.

Now energy market, New York Mercantile Exchange, is seeking partners for a possible $7.2bn ($14.2bn) deal going forward. Touted parties include NYSE Euronext, Chicago Mercantile Exchange and Deutsche Borse.

Nasdaq has denied that it could return for a third battle with the London Stock Exchange, but that could change come February since the American outfit already owns nearly 30 percent of LSE shares.