Italy: Ruling coalition votes against ESM reform

Rome: Italy’s lower house of parliament voted on Thursday against a long-awaited reform of the euro zone bailout fund, throwing into doubt ratification of an EU treaty that is designed to provide help for failing banks.

The vote confirmed the deep hostility within Prime Minister Giorgia Meloni’s ruling coalition to the overhaul of the so-called European Stability Mechanism (ESM), which has been approved by all other eurozone countries bar Italy.

“For six months here, there will be no talk about ESM,” Ylenia Lucaselli, from Meloni’s nationalist Brothers of Italy party, told reporters.

Deputy Economy Minister Maurizio Leo said parliament was sovereign and the government had to recognise its decision.

Meloni and Economy Minister Giancarlo Giorgetti were not in the chamber on Thursday for the debate and subsequent vote, which saw approval for the ESM defeated by 184 votes against to 72 in favour, with 44 abstentions.

Brothers of Italy party and Giorgetti’s League both voted against, whilst the other main coalition group, Forza Italia, abstained. The opposition 5-Star Movement, headed by former Prime Minister Giuseppe Conte, also opposed the motion.

The ESM can offer a lifeline to euro zone governments cut off from markets, or recapitalise banks and provide precautionary credit. However, many Italian parties fear the pact could trigger a restructuring of Italy’s huge public debt.

The original ESM remains operational, but it cannot support the Single Resolution Fund, responsible for dealing with ailing banks, without Rome signing up to the deal.

Earlier on Thursday the ruling coalition in the budget committee also voted against ratification, complaining that the treaty did not guarantee the involvement of parliament in any eventual request for help.

Meloni has repeatedly criticised the ESM for requiring countries to implement austerity or financial reform programmes in return for its help, saying this would increase the risk of a debt restructuring.

The ESM vote came the day after EU member-states clinched a deal on more lenient fiscal rules. Meloni said the newlook Stability and Growth Pact was better than the old one although she was disappointed it had not excluded strategic investments from countries’ deficit and debt calculations.

The Italian government indicated earlier this month that it would not approve the ESM treaty unless there was first an agreement on the stability pact.