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Reuters: Italy slows down EU financial stabilisation fund

13-1-2023 |

Italy's Prime Minister Giorgia Meloni on Thursday renewed her criticism of the euro zone bailout fund, a 500-billion-euro facility held back by Rome's reluctance to ratify its recently-adopted reform.

Meloni aired her concerns about the so-called European Stability Mechanism (ESM) in a meeting in Rome with the fund's top managers, Director General Pierre Gramegna and Secretary General Nicola Giammarioli.

According to a government statement, she "reiterated her view" that ESM is an "anomaly" because despite having significant resources at its disposal, "it has not been used for a long time."

Meloni asked the heads of the ESM to consider, together with the other backers of the fund, "possible remedies" to turn it into a more effective tool to support the economies of the euro area, the statement added.

The ESM was created in 2012, replacing a temporary fund established in 2010, at the height of the euro zone's sovereign debt crisis. To date, five countries have turned to it for support: Greece, Ireland, Portugal, Spain and Cyprus.

The ESM can offer a lifeline to euro zone governments cut off from markets, or lend to recapitalise banks and provide precautionary credit. In return, it normally requires austerity or financial reform programmes.

The fund was reformed with a 2021 treaty that needs to be ratified by all members of the euro zone before it can enter into force, and Italy is the only country that is dragging its feet over the issue.

New ESM tasks under the reformed treaty include providing a backstop to the Single Resolution Fund, which is responsible for dealing with failing banks in the context of the Banking Union.

A number of Italian politicians, including Meloni when she was in opposition, have attacked the reform, arguing, among other things, that it would increase the risk of a restructuring of Italy's huge national debt.

Economy Minister Giancarlo Giorgetti, who also took part in the talks with the ESM managers, said last month that the Italian parliament needed to have "a proper and broad debate ... before deciding whether or not to ratify" its reform treaty.

Source: Reuters