On Friday, the Italian Minister of Finance unleashed a political storm as he signed a rescue agreement in the euro zone involving the rescue fund of the European stability mechanism of the region, a politically toxic prospect in Rome.
Roberto Gualtieri was among the ministers who signed an economic package of 500 billion euros on Thursday evening as part of an agreement hailed as a major breakthrough in the fight against the economic suffering caused by blockages linked to the coronavirus.
But he and Prime Minister Giuseppe Conte faced an immediate reaction when the details of the arrangement emerged. Italy has not obtained any explicit reference to the concept of “coronabonds” – debt issued jointly subscribed by the member states of the euro area – but at the same time, it has accepted a set of measures providing for a role for the ESM, which is viewed with deep suspicion in Rome.
Mr. Gualtieri’s compromise was strongly criticized not only by the opposition Matteo Salvini League party, who denounced the minister as a “traitor” and called for a vote of no confidence, but also by the Movement five star, who shares power with the center-left. Democratic party to which the Italian Minister of Finance belongs.
“We do not accept ESM now and will not accept it in the future… It is an unsuitable tool to deal with this crisis and it is very dangerous,” said Vito Crimi, the political leader from Five Star, in an interview with Radio 1, an Italian public channel.
Thursday’s breakthrough on the economic measures support for businesses, workers and rulers was obtained after the Dutch government abandoned previous requests to subject ESM loans on tougher macroeconomic conditions.
The key elements of the package are the revised pandemic lines of credit of the MES which will be available within two weeks, a strengthening of the lending capacity of the European Investment Bank and a new unemployment insurance scheme of 100 billion euros proposed by the European Commission.
Ministers also agreed to set up a “temporary and targeted” stimulus fund to help spark an economic rebound after the foreclosure, but have yet to resolve key questions about the size and sources of funding for the economy. tool, or even when it is fixed. to the top.
The very inclusion of MES remains politically dangerous in Italy; Eurosceptic parties have long claimed that the fund would impose draconian conditions in exchange for any loan to besieged rulers. Reacting to the agreement, Mr. Salvini in a tweet: “I am horrified and I will ask for the resignation of an economic minister who sold our country.”
For his part, Gualtieri expressed satisfaction with the result obtained by Italy after having “fought a difficult battle”, declaring that the critics of the agreement were “ridiculous”. The agreement meant that conditionality for the use of MES funding was “excluded,” he argued. What is more, Italy has not given up on the idea of Eurobonds.
Bruno Le Maire, the French Minister of Finance, told the Financial Times that it was entirely up to Italy to use MES or not.
Italy, he argued, had obtained something that was absolutely critical: there were no macroeconomic conditionalities on the ESM credit lines. “This is huge progress. This is a very important victory for Italy, “he said in a telephone interview on Friday.
It is far from clear that Italy will want to exploit the MES given the political risks associated with the Luxembourg-based entity. The Eurogroup also left open a major debate on the degree of sharing of the economic burden that will be necessary to revive economic activity after the blockages have ended.
While Italy is one of the countries defending the idea of joint debt issuance under the banner of coronabonds, the northern states, including Germany and the Netherlands, have rejected the concept. The text of the agreement on Thursday indicates that a new stimulus fund to support the possible economic reconstruction will be “proportionate to the extraordinary costs of the current crisis and will help to spread them over time thanks to appropriate funding”.
But officials have admitted that the drafting documents on the deep divisions over the size of the fund need to be, how it should be set up urgently and how the costs will be shared between the fiscally stronger and weaker capitals.
The “conceptual frameworks” for the fund differ considerably from one member state to another, an EU diplomat said on Friday. “The debate on debt pooling has once again proved to be very contentious and must be put in the freezer. This would only divert attention from the real problem in question: the recovery of the European economy after the crisis. “
Le Maire said he hoped that an agreement could be reached so that the collection fund would be based on future issues of joint debts for a limited period.
EU leaders will meet to discuss finance ministers’ proposals on 23 April, and one of the main questions will be how to move forward with the stimulus fund – including how and if integrate it into the negotiations currently stalled over the next seven years of the EU budget.
Lucas Guttenberg, deputy director of the Jacques Delors Center in Berlin, said that the very inclusion of the concept of a stimulus fund in Thursday’s package was progress, as it reflected the recognition that existing tools to tackle the crisis economic were not going to be enough by themselves.
It is now up to EU leaders to decide how to move this debate forward at their next summit, he said. “There must be a clear decision as to whether it has a significant size or not.”
Additional reporting by Daniel Dombey in Madrid, Victor Mallet in Paris and Guy Chazan in Berlin