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The Eurogroup approved the reform of the European Stability Mechanism (ESM). The eurozone economy ministers, after more than three hours of discussion, have reached an agreement on the package that includes, among other things, the advance of the parachute (backstop) for the mutual bank rescue fund (SRF): the parachute will be active two years before than expected, that is, from 2022 instead of 2024. The approval of the reform of the ESM is “good news for citizens and companies”, said the EU Commissioner for Economy Paolo Gentiloni“Because it strengthens the Banking Union” and the agreement was only possible because today “European banks are much stronger than ten years ago”, having reduced risks.
The treaty, which received the final green light, redesign the traditional help of the Month (not the line dedicated to the pandemic born in March), with the aim of preventing crises. The objective of the reform, launched more than two years ago, is to strengthen and simplify the use of the tools available to the ESM before saving a countryThese are precautionary lines of credit, which can be used in the event that a country is affected by an economic shock and wants to avoid ending up under stress in the markets. Reform removes highly contested memo – the one that went down in history for having imposed very strict conditions on Greece – replacing it with a letter of intent to ensure compliance with the rules of the Stability Pact. The reform also entrusts the ESM with another task, to protect taxpayers: provide support to the Srf bank savings fund (the single European resolution fund fed by the banks themselves), should, in extreme cases, deplete the resources available to complete the ‘orderly failures’ of banks in crisis. It is one of the missing pieces of the banking union that Italy had strongly desired. Thanks to today’s decision, it will take effect earlier than expected, that is, in 2022 instead of 2024.
For the German finance minister Olaf Scholz This is a reform that “strengthens the euro and the entire European banking sector, because we make it more robust against attacks by speculators, and we make the banking sector more resistant to crises and, therefore, capable of supporting the real economy ”. Scholz also stresses that “risks on banks’ balance sheets will continue to decline.” But the nod to the backstop progress shows that for the ministers there has already been a significant reduction in banking risks, a good starting point also for the discussion on the last pillar of the Banking Union, that is, the common insurance scheme. . on deposits (Edis). The reform of the ESM will now have to be formally signed by all the states adhering to the treaty, that is, those of the euro area, and then the national ratification procedures can begin.
The Eurogroup debated for more than three hours and the announcement from Italy that paved the way for the step forward: there have been no vetoes by Rome. The group’s debate began at 4.30 p.m. on Monday and, as explained by the Minister of Economy Roberto Gualtieri, did not touch on the issue of the health credit line, at the center of the Italian political debate. Ultimately, the reform has nothing to do with the 36,000 million that could be borrowed, at a reduced rate compared to traditional financing through government bonds. In 5 star movementHowever, there was no lack of discontent and the ruling political leader Vito Crimi he intervened trying to calm the controversy: “The reform of the Month and its use are two totally different elements. A clear and substantial distinction, ”he said. And, as far as Italy is concerned, our country does not need to resort to it ”. But on the M5, the weather is still very tense. Since Elio Lannutti to Raphael Raduzzi to Alvise ManieroFrom one part of the Movement there is clear opposition to the reform. It is the wing closest to Di Battista, the one that accuses the M5 leaders of having yielded to the logic of compromise. And the MEP has openly spoken out against Crimi Ignazio Corrao: “Speaking in a personal capacity, Gualtieri negotiates without the mandate of a force that represents 2/3 of the majority.”
The objective of the Eurogroup, however, was not to debate the health credit line, but to introduce a new element for the Banking Union of the Old Continent, that is to say the backup (‘the last resort’) of the bank resolution mechanism: once all other options have been exhausted, the safety net will come from the Save States Fund. “It’s one of those things that will strengthen the euro,” the president said. Pascual Donohoe. A safety net could become essential given the inexorable contraction (some forecast -8%) of GDP in the eurozone and the possibility of a large growth of new ‘bad loans’ (Npl).
Finance ministers had already agreed to the review of the ESM in 2018. And now, ahead of schedule, the final go-ahead has arrived. The next step is scheduled for January next year, with the signing of a new treaty that must then be ratified by national parliaments. And the final goal that should be reached by early 2022.
As reconstructed by the LaPresse agency, at the meeting of ministers, in addition to the node on Save States Fund, the file from Greece was also addressed. In a note issued in the early afternoon, the progress made by Athens was praised, calling on it to “maintain, and where necessary strengthen, reform efforts to support economic recovery, enhance resilience and support economic growth. commitment to enhance long-term growth potential. ” From the European financial stability mechanism, pending further development of Greece, they still declare their intention to approve transfers for a total value of 767 million euros.
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