The planned reform of the ESM rescue fund for the 20 member states of the euro zone is being blocked by Italy. With the votes of Prime Minister Giorgia Meloni’s right-wing government camp, the Chamber of Deputies in Rome rejected ratification of the plans. This means that the changes will most likely not come into force at the beginning of the new year as planned. The other euro states had already given the green light for this. The rescue fund itself remains in force despite the Italian veto.
The no from Rome, which was preceded by long debates, was clear. In the Chamber of Deputies – the lower house of parliament – 184 MPs voted against it. 72 voted in favor of this. 44 abstained from voting. In Italy, a coalition of three right-wing parties has been in government under Meloni since October last year. The right-wing camp had already expressed opposition to the rescue package during the opposition period.
The European Stability Mechanism (ESM) is a fund from which the 20 euro countries can receive loans in the event of a crisis to ensure their solvency. It has been running since 2012. The euro finance ministers agreed on the reform years ago. In order for it to come into force, the consent of all parliaments is required. In Germany, this has long been done by the Bundestag and Bundesrat.
Money blocked for resolution fund
With the veto, Italy is blocking funds for the European resolution fund SRF (Single Resolution Fund). It is financed by the banks in order to have a pot of money in the event of a major banking crisis in which the EU has to step in to the rescue – for example by purchasing assets.
The main element of the planned reform of the ESM should be a kind of retention basin for the SRF: The ESM should be able to provide money when the crisis fund is exhausted. This “backstop” should come into force at the beginning of the year. Non-ratification means a major rift for the EU banking sector.
In Italy, today’s Deputy Prime Minister Matteo Salvini from the Lega party in particular opposed the reform, as did Meloni himself. In the Chamber of Deputies, the Lega and Meloni’s Fratelli d’Italia (Brothers of Italy) party now voted against ratification . Most of the MPs from the third coalition partner Forza Italia abstained. Those close to the Prime Minister said that the no would offer an opportunity for “new considerations” at the European level.
Eurogroup boss Paschal Donohoe expressed disappointment. The backstop is missing a milestone on the way to a banking union in the Union. He will continue to lobby those responsible in Italy in the coming months.
