MNI: Italy To Ratify ESM Changes, Quit Bargaining-Sources

The Italian government is planning to reopen detailed parliamentary discussion of its long-delayed ratification of changes to the treaty establishing the European Stability Mechanism in the second half of June, after Prime Minister Giorgia Meloni decided it was no longer useful as a bargaining chip in fiscal talks with the European Union, government and parliamentary sources told MNI.

“We are looking at the topic with discretion and we will accelerate after the European elections,” said one government source, referring to June’s European Parliament elections in June whose results he said would be crucial in determining Italy’s actions. (See MNI: Meloni Seeks Euro Election Leverage For Tax Drive-Aides)

After unsuccessfully trying to link ratification of the treaty, which is fundamental to the EU’s bank resolution architecture, to reforms of the bloc’s fiscal rules and to more flexibility over Italy’s payments from the NextGenerationEU programme, Meloni has decided that the time has come to make an unambiguous push for its approval. It is still possible though that Italy might first push again for changes to the ESM reform itself, though this will depend firstly on whether Commission President Ursula von der Leyen, with whom Meloni has established a good working relationship, secures re-election, two sources said. (See MNI: 2nd-Term Von der Leyen Seen Toning Down EU Climate Push)

ITALIAN PARLIAMENT

Italy is the bloc’s only country not to ratify the ESM changes agreed by member states in early 2021, but while Meloni has used this omission to strengthen her hand in negotiations with the EU, she is personally in favour of the reforms to the treaty. Other members of her governing coalition, in particular from junior partners the League, are bitterly opposed to the proposed new configuration of the ESM which they say would impose humiliating conditions on creditor countries forced to accept its assistance.

In December, Italy’s parliament voted against ratification, meaning it could not come up for consideration again for at least six months, with Meloni’s own Brothers of Italy party making a tactical decision to shelve the matter in order to prevent handing ammunition to the League ahead of the European elections.

Now the prime minister hopes that a strong European result for Brothers of Italy will grant her the political space to push ratification through, particularly as after June there will be no further elections in Italy for some time.

Finance Minister Giancarlo Giorgetti, who has come under increasing pressure from his peers in the Eurogroup, has also argued that further delaying ratification will detract from rather than strengthen Italy’s position in debates such as that over a possible extension of the EUR800 billion NextGenerationEU programme, sources said.

LEVERAGE WITH VON DER LEYEN

Meloni calculates that more seats for Brothers of Italy in the next European Parliament, and for the European Conservatives and Reformists grouping of which it is part, will make her support more valuable for Von der Leyen as she secures another term, enabling Italy to push both for last-minute changes to the ESM and for more European economic integration. European officials have repeatedly ruled out any modification of the already-agreed ESM treaty changes.

Brothers of Italy, if as polls suggest it garners close to 30% of votes, might also be able to tighten its grip on the Italian government’s economic portfolios, particularly if the League does as badly as expected, sources have told MNI, adding that League leader Matteo Salvini could be forced to resign if his party gets less than 10% or less than coalition partner Forza Italia. (See MNI: Italy's Meloni Eyes League Downgrade After June- Sources)

Salvini has led the League for more than 10 years, moving the party from being a regional force in the north to having a national presence and his departure would force a major rethink of strategy, sources from the party told MNI.