Italian ruling coalition votes against ESM reform
World
Italian ruling coalition votes against ESM reform
ROME (Reuters) - Italy's lower house of parliament voted on Thursday against a long-awaited reform of the eurozone bailout fund, throwing into doubt ratification of a European Union treaty that is designed to provide help for failing banks.
The vote confirmed the deep hostility within Prime Minister Giorgia Meloni's ruling coalition to the overhaul of the so-called European Stability Mechanism (ESM), which has been approved by all other eurozone countries bar Italy.
"For six months here, there will be no talk about ESM," Ylenia Lucaselli, from Meloni's nationalist Brothers of Italy party, told reporters.
A source in Meloni's office, who asked not to be named, said the rejection could provide an opportunity for the EU to consider changes to the ESM more in line with the euro zone's needs.
Meloni and Economy Minister Giancarlo Giorgetti were not in the chamber on Thursday for the debate and subsequent vote, which saw approval for the ESM defeated by 184 votes against 72 in favour, with 44 abstentions.
Brothers of Italy party and Giorgetti's League both voted against it, whilst the other main coalition group, Forza Italia, abstained. The opposition 5-Star Movement, headed by former Prime Minister Giuseppe Conte, also opposed the motion.
Deputy Economy Minister Maurizio Leo told reporters parliament was sovereign and the government had to recognise its decision.
DEBT RESTRUCTURING FEARS
The ESM can offer a lifeline to eurozone governments cut off from markets, or recapitalise banks and provide precautionary credit.
However, many Italian parties fear the pact could trigger a restructuring of Italy's huge public debt.
The original ESM remains operational, but it cannot support the Single Resolution Fund, responsible for dealing with ailing banks, without Rome signing up to the deal.
The source in Meloni's office said the government did not consider the reform crucial as the Italian banking system was among the most solid in Europe.
Earlier on Thursday the ruling coalition in the budget committee also voted against ratification, complaining that the treaty did not guarantee the involvement of parliament in any eventual request for help.
Meloni has repeatedly criticised the ESM for requiring countries to implement austerity or financial reform programmes in return for its help, saying this would increase the risk of a debt restructuring.
The ESM vote came the day after EU member-states clinched a deal on more lenient fiscal rules. Meloni said the new-look Stability and Growth Pact was better than the old one although she was disappointed it had not excluded strategic investments from countries' deficit and debt calculations.
The Italian government indicated earlier this month that it would not approve the ESM treaty unless there was first an agreement on the stability pact.
"They got it all wrong on the Stability Pact and now to cover up the failure they reject the ESM," said Giuseppe Provenzano, a lawmaker with the centre-left opposition Democratic Party.
