McGuinness to Italy: “Forward with ESM, regrettable not to have anti-shock tools”

Brussels – The new European Stability Mechanism is needed—as never before. To make the eurozone banking sector even more resilient, to shelter itself from unpleasant situations that cannot be ruled out in light of the “so many risks, so much uncertainty, and so much insecurity that we see.” This time, Europe is again putting pressure on Italy through Mairead McGuinness, the Commissioner for Financial Services and Markets. She is the one reiterating the centrality of the ESM and the importance of the ratification of the treaty reforming the inter-governmental organization and subscribed by all in 2021 but with no follow through for Italy’s “no” vote, first at the government level and then of Parliament.

“Sometimes you have to say the same thing over and over again to make it clear that we haven’t changed our mind about the importance of the banking union,” McGuinness stressed at the annual meeting of the European Banking Union’s resolution authority. “Without progress, we need to understand what the consequences are,” she warns. Because “there will always be risks, expected or unforeseen,” especially in heightened geo-political tensions. By Jan. 1, 2022, according to the intentions of the European states, the bailout fund was supposed to start providing money to the Single Resolution Fund, which was established to restructure or liquidate troubled banks without burdening citizens. As envisioned by the treaty for its reform, the new ESM  would thus have provided the financial cushion, the so-called common backstop, to secure the European financial system. However, criticizes McGuinness, “Without the backstop of the ESM, we are missing an important tool to help protect households, taxpayers and small businesses from the costs of a severe financial crisis.” Given the context of unknowns, “it is regrettable that this element of the banking union is not yet in place” is the lunge of the Markets and Financial Services Commissioner. A veritable censure for an Italy painted as isolated, as well as an unreliable partner. The treaty reforming the ESM “has been ratified in all but one national parliament,” and this, McGuiness points out, “testifies to the commitment of euro area countries to strengthening the banking union and ensuring that citizens and small businesses are protected in a banking crisis.”

Italy needs to understand that there is no alternative: that is the not-so-subtle message to the Meloni government and the majority parties. “The best way to ensure a resilient and future-proof European banking sector is to complete the Banking Union,” insists McGuinness. That implies proceeding with the ratification of the ESM.