How the ESM reform project was born (and the pitfalls for Italy)

The point on the reform of the ESM: the reformed ESM is a candidate to be the managing body of the public debt crisis in the coming years. The in-depth study by Giuseppe Liturri

December has been a decisive month for relations between Italy and the EU for at least two years.

For those who want to understand how the Mes reform project was born and the pitfalls it hides (only in the eyes of those who do not want to see them, they are so evident), we suggest following this chronicle which is very suspiciously intertwined with the clash consumed between autumn 2018 and July 2019 between the Conte 1 government and the EU Commission.

But let's go in order and reconstruct the fundamental passages of the story, as in a yellow by Agata Christie, where the only certain victim at the moment is the will of Parliament and a law (234 of 2012) that requires the Government to take it into consideration.

1. Eurogroup 4 December 2018 : the 3-page "termsheet" drawn up by the finance ministers at that meeting contained "in a nutshell" all the essential elements of the reform:
   1. Loan – ESM parachute to the Banking Crisis Resolution Fund.
   2. Modification of the conditions for admission to the precautionary credit line and, by difference, to that at enhanced conditions. Introduction of quantitative parameters.
   3. Theme of the debt sustainability assessment and repayment capacity by the Member State. Introduction of the single vote collective action clause by creditors of all debt stock (CAC single limb).
   4. Relations between the Commission and Mes. With extension of the role of the latter.
2. The Euro summit of the following 14 December approved everything ("We also approve the list of conditions for the reform of the European Stability Mechanism (ESM). On this basis, we ask the Eurogroup to prepare the necessary amendments to the ESM treaty (including support common to the Single Resolution Fund) by June 2019 ")
3. On December 18, Italy, under the pressure of the spread at 300, had the 2019 budget law practically rewritten by the Commission which, with a letter dated 19/12 , accepted the changes made by Italy and undertook not to open the procedure infringement for excessive debt.

It does not take particular insight to understand how, in those conditions of political pressure, the minister of the time Giovanni Tria found himself in conditions very similar to those of De Gasperi at the peace conference in 1946 ("… I feel that everything, except the your personal courtesy is against me: it is above all my qualification as a former enemy, which makes me consider myself a defendant … "). To his majority colleagues who asked him to account for those decisions, Tria kept repeating for months that "it is just a termsheet, nothing is decided ".

4. On 12 June 2019 , Senator Alberto Bagnai was finally able to look at the draft of the text by reforming and, when he reported the critical issues to Matteo Salvini, the now famous "we do not sign a cXXXX " left.
5. Eurogroup 13 June 2019 : this is the second decisive step. Also in the presence of Minister Tria, it was announced that a broad agreement had been reached on the revision of the ESM Treaty in execution of the agreement of December 2018. Work was also announced to define the text and other legal aspects, with the anticipation of reaching agreement on all aspects by December 2019.
6. Meanwhile, the stench of burning increased and Parliament finally became aware of the seriousness of the problem. All summarized in a resolution (Molinari – D'Uva 19 June 2019) which commits the Government "to make known to the Chambers the proposed amendments to the ESM treaty, drawn up at European level, in order to allow Parliament to express itself with an act of address and, consequently, to suspend any definitive decision until Parliament has ruled ”.
7. Two days later, on the occasion of the Euro Summit of 21 June 2019 , President Giuseppe Conte sold the so-called "package logic" to his majority as a great success: that is, the ESM reform should have been approved jointly with the new budget for the competitiveness and convergence (BICC) and the common deposit guarantee (EDIS).
8. On July 4, 2019 , the Commission accepted Italy's capitulation on the 2019 budget (whose deficit / GDP will turn out to be 1.6%, among the lowest in the last 25 years).
9. Eurogroup 4 December 2019 : exactly 12 months after the first political agreement, this informal body of the Eurozone (for the occasion in an inclusive format, i.e. with non-euro countries), communicated to the President of the Euro Summit Charles Michel, that it had reached an agreement "in principle" (in principle) on the entire package of documents relating to the reform of the ESM. The reformed treaty was expected to be signed early next year.
10. On 11 December 2019, the majority resolution 6-00091 (Perilli, Marcucci, Faraone, De Petris) arrived to remind the Government of what has been known for some time: “keep the package logic”; "To exclude restrictive interventions on the holding of sovereign bonds by banks"; “To ensure the full involvement of Parliament in all stages of the negotiations on the future of the EU and on the conclusion of the ESM reform”; “Provide for the full involvement of Parliament in any request for activation of the Mes”.
11. At the Euro Summit on 13 December 2019 , Conte " welcomed " the conclusions of the Eurogroup of 4/12 and the final statement read: "we instruct the Eurogroup to continue working on the ESM reform package – subject to the procedures and to continue work on all elements of further strengthening the banking union, on a consensual basis . "
12. On January 20, 2020, the Eurogroup confirmed the need to dedicate a few more weeks of work to polish the final details on the CACs and promised to reach the final agreement in March to be immediately followed by the signing of the reformed Treaty.
13. On March 16, 2020, the Eurogroup reiterated that there were some legal aspects left to be clarified with reference to the agreement already reached in December, but by now the scene had been taken by Covid and the finalization of the reform was postponed " to better times ".

Those who have had the patience to follow this history cannot escape the following conclusions:

1. The decisive phase, that between December 2018 and June 2019, took place under the threat of the infringement procedure for excessive debt, a threat thwarted only on 4 July 2019. Not surprisingly, only about 40 days passed and the Conte 1 government fell.
2. The essential elements of the ESM reform, the most dangerous ones for our country, have been well defined at least since December 2018 , with Parliament practically not touching the ball on the issue. Parliamentarians can always console themselves knowing that even the Government, as a collegial body, did not play a great role.
3. At this point, the Eurogroup this afternoon will be able to change very little compared to everything already defined. The parliamentary confrontation of 9/12 with the communications of President Conte and the vote on a majority resolution, followed by the Euro Summit of 11/12, will probably constitute the last useful step to be able to stop a train that has now been launched at too high a speed. to be able to arrest him.

As has happened too often in almost 30 years of the history of the European Union, we find ourselves accepting decisions that are potentially very harmful for the future of our country's economy, without having had a minimum of debate at least in the competent institutional forums. Not to mention the public opinion that gropes in the dark or is tainted by the most vulgar propaganda.

The reformed Mes is a candidate to be the managing body of public debt crises in the coming years and it is not difficult to predict who will be its first customer, also and above all due to rules that will facilitate the fall from grace of our country in the eyes of markets.

If in the two houses of Parliament there is still someone who cares about the future of Italy, these days they have the opportunity to prove it.

Here you make Italy or die.

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This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/mondo/come-nasce-il-progetto-di-riforma-del-mes-e-le-insidie-per-litalia/ on Mon, 30 Nov 2020 06:14:06 +0000.