MNI: Italy Said To Aim To Approve ESM After EU Fiscal Deal

The Italian government is happy with the latest proposal to reform European Union’s fiscal rules but wants to wait until a deal is finally made before proceeding with its long-awaited ratification of changes to the treaty outlining the European Stability Mechanism, sources close to the matter told MNI.
The proposed fiscal deal tabled by the holder of the EU’s rotating presidency Spain, which would make it easier for excessively-indebted countries to extend ­­adjustment periods to up to seven years but which still faces some reservations from Germany, meets a substantial part of Italy’s requirements, the sources said. (See MNI: Hopes Rise In Dash For EU Fiscal Rule Deal By Year End)

Such a deal, if finally agreed by European finance ministers at a meeting on Dec 8, would give Italy’s government the political cover to push its parliament to ratify the ESM treaty changes, the sources said. A vote on the matter has already been set for Nov 20, but the government is looking for ways to push it back without generating concern among bond markets that ratification could eventually be rejected, a member of coalition junior partners the League told MNI. Adding to nerves are concerns that ratings agency Moody’s could downgrade Italian sovereign debt to junk in an update on Friday. (See MNI INTERVIEW: Italy Debt Still Buoyed By "Whatever It Takes")

SEEKING EXCUSES TO POSTPONE

The vote could simply be postponed, but this is not the preferred modality, a senator from Prime Minister Giorgia Meloni’s Brothers of Italy said.

So far the League has said it will vote against ratification, on the grounds that the ESM, Europe’s bailout fund, imposes harsh conditions on countries which require its assistance, though the official from the party who spoke to MNI said that he personally supported the measure. Italy is now the only the European Union country not to ratify the ESM changes, arousing suspicions elsewhere in the bloc that Meloni’s government has used ratification as a bargaining chip as it pushes for concessions on the fiscal rules. (See MNI INTERVIEW2: Italy’s ESM Ratification More Urgent - Buti)

Additional options for delay include prioritising other urgent parliamentary topics, which, with a debate on the budget due to start on Nov 21, would effectively push ESM ratification into the future. Another would be to commence the ESM debate, but only undertake the final vote once a fiscal rule deal is agreed.

A less likely approach would be to amend the ratification bill so that it only becomes active once the EU agrees a fiscal overhaul, one source said, adding that it was unclear whether this would even be legally possible.

EUROPEAN ELECTIONS

Meloni’s Brothers of Italy had been prepared to pass the ratification promptly until about two weeks ago, when the prime minister realised how potent the ESM issue could be for generating support for the League in next year's elections for the European parliament, the sources said.

Still, with Brussels leaning heavily on the government, both the coalition’s main parties have been trying to find the most politically expedient way of approving the ESM changes, including by possibly allowing the ratification to be passed with support of the opposition. However this approach could lead to questions over the future of the coalition, and could prompt head of state President Sergio Mattarella to summon Meloni to seek clarification.

In a party meeting on Monday, senior Brothers of Italy officials discussed the various possibilities but acknowledged that the treaty changes would eventually have to be ratified. The League also met on Monday, and then on Tuesday Meloni discussed the topic with Finance Minister Giancarlo Giorgetti.

“These are extraordinary times,” said one person that attended Monday’s meeting.