ESM: Meloni wins in the end, the EU gives in: “With the country heading for an election, it would be ill-advised to ask for ratification”

Brussels – Giorgia Meloni has ultimately got her way on the treaty reforming the ESM, the European Stability Mechanism. The Prime Minister has managed to drag things out for so long that her European partners now have no choice but to wait until the 2027 general election. Bulgaria, a member of the eurozone since 1 January this year, has just joined the bailout fund and ratified the relevant treaties, leaving Italy once again as the sole country blocking the process of transforming the ESM into a central player in the banking union. It is no longer appropriate to put further pressure on Italy at this stage, according to well-informed EU sources, as “the country is approaching elections, and this may not be the best time to raise the issue“. The matter has been shelved, for now. 

In Brussels, it is recognised that Italy is already effectively in the midst of an election campaign, and, what’s more, that the head of government is in a difficult position. It would not be in Meloni’s nature to address the issue at a time when she is seeking votes and re-election, and if the leader of Fratelli d’Italia has not changed her mind so far, it is hard to imagine that she might do so now. That is why Brussels is letting the matter slide. Of course, this does not dispel the discontent over Italy holding all its other partners to ransom. “The ESM Treaty represents a sort of uncomfortable limbo in which we have found ourselves for some years now,” complain the same EU sources. 

The fact that Brussels, like other capitals, has thrown in the towel on the ESM is certainly a victory for Giorgia Meloni, but politically it is a defeat for Giancarlo Giorgetti. The Minister for the Economy tried to act as a mediator and offer reassurances. He told his partners that he was working on finding a solution, a solution that never came and which, in the end, the Treasury Minister’s counterparts grew tired of waiting for. 

Under the political agreements reached by the members of the eurozone, from 1 January 2022, the ESM bailout fund was due to start providing funds to the Single Resolution Fund, established to restructure or wind up banks in difficulty, without placing the burden on citizens. This liquidity contribution (known as the “backstop”, or financial safety net) is expected to amount to 1 per cent of all deposits held in European banks participating in the crisis resolution mechanism, totalling approximately €80 billion. With the ESM reform, the intergovernmental body would come to the aid of a Member State upon request, providing loans on stricter terms. This is the political sticking point that has so far prevented the current government from honouring agreements made by previous governments, holding all partners hostage for the entire Italian parliamentary term. Now we await the next one.