In many respects, the outcome of the vote on December 21st in the Italian Parliament wasn’t a surprise. However, despite this, in addition to the purely economic repercussions, it seems evident that the political impacts within the European context will be quite serious.
To better understand this choice, it is necessary to take a step back. The European Stability Mechanism, more commonly known as the ESM or as the European Stability Fund, has been one of the most debated topics in European discussions for several years. This began during its inception as an intervention tool during the infamous 'Sovereign Debt Crisis' that hit Europe between 2010 and 2011. Subsequently, there were attempts to modify it, addressing its shortcomings and integrating it with the structure of the Banking Union.
Is undeniable that the instrument underwent a genesis in recent years, but for this reason, it has not managed to shake off a major flaw: the negative impact from a communicative standpoint linked to the instrument's operations during the 2010 crisis. Despite the operational dimension undergoing profound changes and updates in line with present challenges, including the absence of intervention by the Troika, the instrument continues to be stigmatized by public opinion in some countries.
These dynamics are easily identifiable within the events that have characterized Italian political decisions in recent years, starting from the highly debated decision to accept the negotiated changes by the previous Conte government, up to the recent votes that have thwarted any attempt by Italian authorities to ratify the agreement.
However, as anticipated, such a decision carries a series of consequences, primarily of an economic nature. Indeed, with the lack of ratification by Italy, the last country required to do so, the entry into force of an emergency instrument in the event of future crises within the Eurozone is undermined. This instrument can mobilize around 500 billion for the activation of specific intervention measures[1].
Another equally significant aspect is the failure of the attempt to include within the instrument a financial safety net, better known as the 'backstop,' which would also ensure the institutionalization of a safety net to address future crises in the credit sector. This element had been promoted to define the last pillar of the Banking Union, the supervisory and resolution system for the banking sector within the Eurozone, namely the Common Resolution Fund[2].
To these critical issues, there are also some political ones: Italy's rejection, after a lengthy process, not only causes harm to other European partners who were in favor of introducing the instrument but also raises numerous questions about the dynamics that will now govern relations among the countries.
Symbolic in this case is the clumsy attempt to link the approval of the MES to reaching a favorable agreement on the new Stability Pact, a situation resolved by negotiations between Germany and France, effectively excluding Italy[3].
It seems rather clear, therefore, that the MES is only the latest topic on the European political agenda, uncovering even larger problems, particularly for the country led by Giorgia Meloni. In addition to a rather serious economic situation, there could soon be a growing political isolation.
Translated by Stefania Errico
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Tiziano Sini
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ESM Italy EU reform Treaties Crisis