Italy criticizes planned EU bailout fund reform

Belgium, (Brussels Morning Newspaper) Italy has criticized the planned reform of the EU Stability Mechanism (ESM), the eurozone bailout fund.

Italian Prime Minister Giorgia Meloni stressed on Wednesday that the government needed “further reflection” on the proposal before it could ratify the reform, according to Reuters reporting.

The bailout fund is worth some 500 billion euro and was set up to help eurozone members and banks that are cut off from markets.

Meloni previously criticised the ESM and told Italian MPs that the government would not use the bailout fund, stressing that it should be repurposed to support EU industry.

Italy is the last eurozone member that still has not ratified the reform.

Meloni and other Italian politicians have criticised the reform in the past, warning that proposed changes would increase the risk of restructuring of the country’s debt.

“If we believe the new ESM regulation is not in the national interest of the country… it should be the time to discuss using it as an instrument of European industrial policy,” she noted. The General Confederation of Italian Industry previously made the same proposal.

Reform agreed in 2021

According to changes agreed in 2021 and still awaiting ratification, the ESM would complement the Single Resolution Fund, which finances the restructuring of failing banks under the Single Supervisory Mechanism (SSM).

The reform would also simplify the process of restructuring eurozone members’ debts, which critics warn would make such restructuring more probable. The ESM provides support to eurozone members in need in exchange for implementation of financial reforms and austerity measures.

The ESM was formed in September 2012 to replace the EU Financial Stability Facility (EFSF) and the EU Financial Stabilisation Mechanism (EFSM). Five eurozone members have used the ESM thus far – Cyprus, Greece, Ireland, Portugal and Spain.

“We want to discuss the general framework of European governance and the possibility that the resources, which today are being allocated to the ‘bailout,’ can really be useful to the states,” Meloni pointed out.

“As long as I am Prime Minister, Italy will never make use of the ESM,” Meloni stressed and concluded “and I fear that nobody else will be able to make use of it either.”

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