Mes, Europe puts pressure on Italy: at least let others use it

Europe is tired of following Italy’s wrangling over the ESM and wants our country to ratify it. The struggle has been going on for months, but today the issue has reached the highest levels of the European Council, or more precisely, the Eurosummit, attended by heads of state and government of the twenty member states that have adopted the single currency. Embarrassed by the issue, Prime Minister Giorgia Meloni said nothing about it at the meeting. But in the boardroom, the approval issue was clearly the “elephant in the room,” as the British say, whose presence was obvious to everyone even if it was not named. In his regular letter to European Council President Charles Michel, Eurogroup President Paschal Donohoe underlined that Europe should “not lose sight of the importance of completing the reform of the European Stability Mechanism (ESM)” and argued: “We all, the Eurozone as a whole and Italy “We look forward to the ratification of the ESM agreement in Italy”, which “is in the interest of individual member states, including

After coming to the meeting today, the Irish politician returned to the topic and answered journalists’ questions. “I know very well that the ratification of the agreement reforming the ESM is an extremely sensitive issue for Italian politics. I know that this is a matter of debate in the Italian Parliament and I fully respect that. We are sensitive to the need for every country to do so, and this is something I completely respect,” he said. started. But he later reminded that if the law reforming the ESM “is not approved by everyone, no country will be able to use it.” In his view, Italy should understand that “even if it decides in the future not to use the ESM at all, which is certainly its own choice, I think everyone understands that it can decide on the other side, perhaps in other countries, to use the ESM as well.” This will be the tool in the future and they won’t be able to do it without our green light.

However, at the meeting with the leaders, the Eurogroup president did not directly mention Italy in his speech about the ESM; this could have had unintended political effects and was considered an unwarranted and undiplomatic gesture. However, the fact that Donohoe brought up the issue first in his letter to Michel and then in his public statements shortly before the start of the meeting means that the political pressure on Italy continues. Moreover, 19 other countries with a single currency have already given the green light and we are the only ones missing. The debate on ratification in the Parliament is scheduled for 20 and 24 November, and there is currently no sign that the majority is united on ratification.

ESM, also known as the Save the State fund, is the European Stability Mechanism, a crisis resolution mechanism created for the states in the euro area in 2012. Its main function is to provide financial assistance, under certain conditions, to member countries that have sustainable public debt but experience temporary difficulties in financing themselves in the market. In effect, this means that a government receives loans in return for reforms that are usually agreed with Europe. Of course, no state is obliged to use funds if they can find them elsewhere. In 2021, thanks to an agreement also signed by all countries in the Eurozone (including Italy), a reform of this instrument was proposed that would allow it to provide a financial safety net (backstop) to the Common Settlement Fund for banks. At the same time, the conditions for accessing financial aid were partially changed and a new so-called “precautionary” credit limit was introduced. However, with the change of government in Rome, the line of our country also changed.

Prime Minister Giorgia Meloni’s position on the ESM is that ratification should be part of a ‘package logic’: essentially, it is an issue that cannot be separated from other issues related to economic ‘management’ and, in particular, Stability Pact reform. It concerns budget rules, the way defense spending is handled, the green transition and spending linked to ‘European priorities’ in general. In the sense that explicit procedures should not be taken into account for their purposes. Although the so-called ‘package logic’ is applied in many cases in EU negotiations, down to the formula ‘nothing is decided until everything is decided’ in a particular ‘dossier’. However, this approach was rejected by other finance ministers if the ESM were to be approved. Also because this was a closed chapter in the sense that Italy also ‘signed’ it at that time. The problem is entirely related to national domestic politics: FdI and Lega were always against the ESM, and even during the Draghi government the Star Movement (in addition to the Union) was against it.

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