MNI POLICY: Eurozone Bailout Fund Revamp Pushed Back By Virus

By Silvia Marchetti and David Thomas

     ROME/BRUSSELS(MNI) - Political approval of a planned revamp of the

eurozone's bailout fund looks set to be pushed back for months as the

coronavirus crisis overpowers other concerns, European Union and Italian sources

said.

     The reform of the European Stability Mechanism, which aims to make it more

difficult for national governments to veto its decisions and expand its role so

that it can backstop the Single Resolution Fund, had been set for approval by

the Eurogroup of finance ministers on Monday, prior to ratification by national

parliaments.

     The meeting is now expected only to examine the next steps before passing

onto more pressing matters such as allowing states to temporarily breach

European fiscal and debt rules as they cope with the epidemic, the sources said,

with one adding that ESM approval would be pushed back to April.

     --ITALIAN CRITICISM

     The planned overhaul of the fund had been harshly criticised in Italy,

including by members of the 5-Star Movement, which shares the country's

coalition government. Arguing that the changes would make it easier for the ESM

to impose onerous terms on countries seeking bailouts, they had threatened to

block it in Italy's parliament. The other main coalition partner, the Democratic

Party, is also unhappy with aspects of the reform, together with the lack of EU

progress on associated matters such as joint bank deposit insurance.

     The ESM remains available in its current form, should any country succumb

to financial pressure, a 5-Star official noted to MNI.

     "If we approve the revised text, it would just be worse for us: Italy would

be barred from accessing funds due to its fiscal position," the official said.

     Italy's economy is now undergoing extreme hardship as the authorities take

drastic measures to contain the spread of the virus.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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