MNI EXCLUSIVE:Coalition Nerves As Italy Set To Pass ESM Reform

Italy's parliament is likely to vote to ratify a long-delayed reform of the European Stability Mechanism on Dec. 9, with rebel members of the populist Five-Star movement being wooed with promises of greater government efforts to access European grants and supporters of Silvio Berlusconi's political party possibly abstaining, officials told MNI.

But there is little margin for error for approving the key eurozone reform, which has been held up in Italy all year. A tight vote would put more pressure on the governing coalition between the fractious Five-Star and the smaller but more disciplined centre-left Democratic Party, possibly prompting Giuseppe Conte to reshuffle his government, officials said, adding that there was little danger to the prime minister himself but that the Democrats may push for greater ministerial representation. Conte said on Thursday that he does not want to change his government team.

A group of 69 Five-Star legislators publicly oppose backing the ESM reform, agreed by eurozone finance ministers earlier this week and which is essential to providing an early backstop to the eurozone's Single Resolution Fund for failing banks. Some of the rebels will likely be persuaded to vote in favour at a parliamentary party meeting scheduled for later on Friday, while others may end up abstaining, Five Star and Democratic Party officials told MNI.

COVID CASH

To win over them over, European Affairs Minister Vincenzo Amendola, in charge of writing the ESM resolution for parliament's approval, may include calls for Conte to push his counterparts at the Dec. 10 European Council meeting to accelerate grants under the Next Generation EU Covid recovery programme and also possibly for an acceleration of plans for a European Deposit Insurance Scheme before reforming the ESM, sources close to the minister told MNI.

Silvio Berlusconi's Forza Italia, which issued a surprise threat to block the ESM reform, is likely to eventually abstain, allowing its approval, the group's deputy whip Senator Lucio Malan told MNI.

But the nerves over the vote expose the weakness of the governing coalition, Malan said.

"When you need to lean on an opposition party for every important vote you have a problem," he said.

Parliamentary sources told MNI that four or five FI lawmakers could leave the party and join the governing majority in the Senate.

The Five-Star movement has fought a long battle against the ESM reform, which it says would impose punitive terms on states which need money, before finally being won over. Now some Five-Star legislators still want the resolution to specify that Italy will not access ESM funds. But Democratic sources said this would cause an "enormous problem" within the coalition and is likely to be avoided. Democrats told MNI they are tiring of the indiscipline of the Five Stars, and the regular defections by legislators from the movement.