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Italy Threw Monkey Wrench into EU Bank-Bailout Fund

The Italian Chamber of Deputies has rejected ratification of the reform treaty for the EU bank-bailout fund, the European Stability Mechanism, in its vote Dec. 21, that saw opposition party M5S voting with the Lega and Fratelli d’Italia (FdI), while the third coalition partner Forza Italia (FI) abstained (184 No, 72 Yes and 44 abstained).Thanks to the Italian Chamber vote, the EU is now without a real safety net for banks, as the current Single Resolution Fund, financed by the banks themselves, does not have enough money in case of a crisis of a “systemically important” bank.

Although the Lega had strongly campaigned against ratification, it was not clear how its government ally, Prime Minister Giorgia Meloni’s party FdI, would behave. As Lega Senator Claudio Borghi, leader of the “No” campaign explained to journalists, FdI was always against the ESM, but was waiting for the result of the other negotiation, the one on the new debt rules (the Stability Pact) before deciding. The Italians wanted the so-called Recovery debt to be excluded from calculation of the deficit, but they felt double-crossed by France and Germany, that jointly struck a deal which was then imposed upon the other partners.

“Giorgia had to gain time for opportunity reasons,” Borghi said. “She had 10,000 pressures as everybody was saying, she could not sit down at the table in Brussels and immediately give it a slap. But she knew well that the [ESM] is Snow White’s apple.” He said, “The decision had to be taken, whether to turn down the [Stability] Pact or the ESM,” because “both would not be possible” and “we chose the one that was most harmful to Italy.”

Indeed, the Budget and Treasury Committee of the Chamber of Deputies postponed its recommendation to the floor until the morning of Dec. 21, after the conclusion of the negotiation on the Stability Pact. The Committee concluded that the text “is missing proper mechanisms to guarantee the involvement of Parliament,” and that could “jeopardize the possibility that Parliament should monitor further payments of the earmarked capital.”

In other words, it is not acceptable that, as per treaty, ESM managers can decide to call in billions in earmarked capital from member states, to be paid within a week, without Parliament’s approval .

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