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Italy lower house gives PM Conte green light to back ESM reform

Italy lower house gives PM Conte green light to back ESM reform

December 9, 2020

By Gavin Jones and Angelo Amante

ROME (Reuters) – Italy’s lower house of parliament gave the go-ahead on Wednesday for Prime Minister Giuseppe Conte to approve a contested reform of the euro zone’s bailout fund, known as the European Stability Mechanism (ESM), at an EU summit on Dec. 10-11.

Last week some 60 rebels from the co-ruling 5-Star Movement, which has always opposed the reform, threatened to vote against the government, leaving it potentially vulnerable in Wednesday’s votes in both houses of parliament.

However, coalition negotiations produced a resolution which most 5-Star deputies agreed to, authorising Conte to approve the ESM changes while pursuing other reforms of EU financial management aimed at overturning austerity.

At the end of a heated debate the Chamber of Deputies approved the resolution by 314 votes to 239.

The more eagerly awaited vote in the upper chamber, the Senate, where Conte normally has a much slimmer majority, will be held after 1700 GMT on Wednesday. Assuming the government wins it, Conte will sign off on the revamped ESM at the summit.

The reform, which Italy has held up for months due to 5-Star’s resistance, must then be ratified by national parliaments before it comes into force on Jan. 1, 2022.

CLIMBDOWN

The resolution approved by the Chamber is a climbdown for 5-Star, which has always presented the ESM as a pernicious instrument for enforcing what it sees as outdated euro zone austerity rules, and argued that the reform only made it worse.

“We have to say clearly this is not a vote to activate the ESM and it’s not a vote to ratify the reform… It is a vote to give a full (negotiating) mandate to the prime minister,” 5-Star deputy Filippo Scerra told the Chamber.

Claudio Borghi, speaking for the right-wing League, the main opposition party, said Economy Minister Roberto Gualtieri could eventually be prosecuted for betraying the national interest by pursuing the ESM reform without a parliamentary mandate.

He goaded 5-Star’s deputies who had always opposed the reform along with the League, saying they had the opportunity to be “patriots” but “from today will be seen as traitors”.

Proponents of the reform stress that it would allow the ESM to act as a financial backstop for another EU kitty, The Single Resolution Fund, set up to help failing banks.

However, 5-Star is concerned about other aspects, such as a greater role for the ESM in assessing the debt repayment capacity of countries that use the fund and in overseeing the reform programmes they must undertake. These tasks are performed jointly with the European Commission.

Above all, 5-Star opposes a change stipulating that bonds issued by euro zone states from 2022 have conditions attached that would make debt restructuring easier and more orderly.

Critics say this will also make restructuring more likely, hitting Italian savers and investors who hold most of the country’s sovereign debt, which amounts to around 160% of gross domestic product.

(Additional reporting by Giuseppe Fonte and Francesca Piscioneri; Editing by Gareth Jones)

The post Italy lower house gives PM Conte green light to back ESM reform first appeared on One America News Network.

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