What is the Mes, what it provides for and why ratification is in doubt
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The European Stability Mechanism (ESM), also known as the “bailout fund”, was created in the wake of interventions in the sovereign debt crisis that occurred in 2010 with repeated interventions to avert Greece’s default. With the arrival of the pandemic, it was decided to modify it by providing it with 240 billion to be used to deal with the health emergency.
When was he born?
Created in 2012 with an intergovernmental treaty, the Mes serves to grant financial assistance under pre-established conditions to member countries that may find themselves in difficulty in financing themselves through the normal placement of government bonds. In return there are a number of conditions to be signed. Up to now it has intervened to help Ireland, Portugal, Cyprus, Spain for the financial exposure of the banks and Greece for a total of 295 billion, also considering the interventions guaranteed by the EU since 2010. In exchange for the loans, a program of debt repayment and control with macroeconomic adjustment plans, draconian reforms according to the most critical ranging from pensions to public spending to more direct interventions. Lighter criteria are instead required for precautionary credit lines, for states affected by adverse shocks but in financial conditions with healthy fundamentals.
Mes and work, the government skids
ALESSANDRO BARBERA
What was it for during Covid?
A few months after the outbreak of Covid, the Mes was also put in place with a 240 billion credit line to support the pandemic crisis, available to Eurozone countries to finance only the costs associated with the health emergency, even if so far the credit line has not been used by EU partners. The mechanism is guided by a Council of Governors, made up of finance ministers of the euro area, and takes the main decisions unanimously. It has a subscribed capital of 704.8 billion, 80.5 billion already paid up, with a lending capacity of 500 billion. Italy, the third shareholder after Germany and France, has subscribed the capital for 125.1 billion and paid over 14.3 billion.
What is the reform you are talking about?
The reform of the 2021 Mes Treaty, voted in the Council in Brussels during the second Conte government, further intervenes on the conditions for financial assistance and on the differences between the lines with enhanced or simple conditionality, as in the case of the request for intervention for the healthcare costs related to the pandemic. The heart of the reform, however, is to attribute to the Mes the function of providing a financial safety net (backstop) to the Single Resolution Fund in the context of the banking crisis management system. In other words, as an instrument of assistance to states, the Mes also comes into play in credit crises, a central step in completing the banking union. Among other things, it provides that the Mes can act as a mediator between states and private investors in the event that the restructuring of a public debt is needed.
Majority under stress
marcello arise
Who ratified it?
After the changes made, the only countries left to have not ratified them were Germany and Italy. Last December, after the German Constitutional Court rejected the appeal of seven liberal deputies, the go-ahead was given to the reform of the mechanism and now Italy is being asked several times to give its assent for the definitive launch. After Croatia’s entry into the euro at the beginning of the year, Zagreb also joined the Mes and recently approved the founding treaty and the reform treaty. Now only Italy is missing.
What happened yesterday in the Commission?
In an attempt to buy time, the majority had asked the Treasury for a reasoned opinion. Lega and Fratelli d’Italia hoped that a judgment full of doubts would arrive on the table of the president of the commission Giulio Tremonti. And yet it was not so. The two-page note signed by the head of the cabinet Stefano Varone – dated June 9 and registered in the Chamber on the 14th – offers very few arguments for critics. “The ratification of the aforementioned agreement does not result in new or greater burdens than those authorized on the occasion of the ratification of the Treaty establishing the European Stability Mechanism in 2012″. More: «There are no changes in the agreement such as to suggest a worsening of the risk. Furthermore, there is no news that a worsening of the risk of the Mes has been highlighted by other subjects such as the rating agencies, which have indeed confirmed the highest evaluation attributed to it even after the signing of the agreements”. Varone offers just a nuance regarding «possible» indirect effects of the reform: «They could abstractly appear […] for the request for payment of the unpaid shares of the authorized capital”. The new State-saving Fund has a theoretical value of 704 billion euros, 80 of which have already been paid in and are useful for dealing with a crisis similar to the one that in 2011 pushed Italian debt to the brink of default. Italy, the third shareholder after Germany and France since the establishment of the Mes, has subscribed the capital for 125 billion and has so far paid 14.5. The paradox has it that the current limit of the Fund, too small to deal with a crisis, has opened a debate in the European chambers on a further reform that will allow the Mes to carry out the tasks of a complete sovereign investment fund. The pressure from partners is essentially political: the Italian postponement exhibited, with a blackmail flavor, has annoyed many chancelleries, starting with Berlin.
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