Free Trial

MNI SOURCES: Italy Sees Eurozone Bailout Fund Deal As Unlikely

By Silvia Marchetti and David Thomas
     ROME/BRUSSELS(MNI) - A deal to unlock the impasse on reforming the
eurozone's bailout fund looks unlikely at a meeting of senior finance officials
in Brussels on Wednesday, officials told MNI, with Italian government sources
saying disagreement persists on the key issue of collective action clauses which
could make debt restructurings easier.
     Italy, which already forced a delay in revamping the European Stability
Mechanism in December, wants the CACs to be watered down. Prospects also look
poor for moves towards strengthening banking union, on which Rome has
conditioned progress for the ESM, officials in Brussels said.
     Without some sort of compromise at Wednesday's Euro Working Group meeting,
there will be little chance of an ESM agreement at the Eurogroup gathering of
eurozone finance ministers later in the month, officials said. An ESM deal might
then take months or longer, Italian officials said.
     A protracted delay would further highlight the eurozone's inability to
overhaul its governance, even as its economic prospects dim, and has been made
more likely by the internal rivalries of Italy's fractious coalition government.
     "We're still far from reaching a deal on this at EU level that satisfies
everyone", said an official with ties to Italy's co-ruling centre-left Democrat
     The Democrats' allies in the populist 5-Stars Movement have been vocal in
their opposition to the ESM changes, and particularly to so-called "single-limb
CACs", which would allow a single vote by bondholders to authorise a
restructuring across several different series of bonds.
     Italy wants a system closer to "double-limb CACs", which require votes by
investors in different instruments. Otherwise, it argues, its own outstanding
debts, such as its BTP inflation-indexed bonds targetted at retail investors,
might be vulnerable. Additional categories of debt, requiring separate votes,
must also be recognised, according to the Italians.
     Rome, unlike some other countries such as France, wants the CAC measures to
be simply adopted by the ESM, rather than incorporated in treaty changes, which
would then have to be ratified by all 19 member states. It also wants to soften
conditions for accessing the ESM's credit lines, which under the proposals call
for borrowers to comply with EU fiscal rules, and for the mechanism's managing
director to have less discretionary power in deciding who is eligible for a
     Hopes for progress on the key element of European towards eurozone-wide
bank deposit insurance, in line with Italy's call for a strengthened banking
union, briefly rose last November, when German Finance Minister Olaf Scholz
indicated support for the idea, but these have since faded, particularly
following Scholz's failure to win the leadership of his centre-left SPD party.
     "The idea was to unlock the first stage of discussing banking union, but it
is not now clear if we're ready for that," an official in Brussels told MNI. "So
now it's a German-Italian wrangle and that's what the EWG will discuss
     Sources said that the EWG would decide tomorrow whether there is sufficient
agreement on the ESM for the issue to be considered at the Eurogroup meeting
later this month.
--MNI London Bureau; +44 203 865 3829; email:
[TOPICS: MFIBU$,M$E$$$,M$I$$$,M$X$$$,MC$$$$,MT$$$$,MX$$$$,MFX$$$,MGX$$$]

To read the full story



MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.