The new European Stability Mechanism: opportunities and challenges for Italy

The new European Stability Mechanism (ESM), created in 2019, represents a significant evolution compared to the previous bailout fund. This reform was conceived in response to criticism received during the Greek crisis, where the austerity measures imposed raised strong controversy. The European Union therefore decided to reform the ESM, expanding its powers and tasks, with the aim of providing support to member countries before they find themselves in crisis situations.

The reform eliminated the controversial Memorandum, replacing it with a letter of intent, which ensures compliance with the rules of the Stability Pact.

The new credit lines and conditions

One of the most important innovations of the new ESM is the introduction of precautionary credit lines. These lines can be requested by a Member State facing an economic shock, allowing it to avoid pressure on financial markets. However, for countries with high deficits and debts, access to these lines is subject to strict conditions, which require corrections in public finances. This aspect of the reform has raised concerns, as it could limit the capacity of some Member States to intervene, especially the most vulnerable ones.

Italy's position and political challenges

Although the first ESM was ratified by Italy, the current reform has faced strong political opposition. Italian governments of all compositions have shown resistance to ratifying the reform, citing concerns about collective action clauses and the possibility of renegotiating the terms of government bonds. The current government led by Giorgia Meloni has also faced internal and external pressure, with the European Union pushing for rapid implementation of the reform. The rejection of the ESM by the Chamber of Deputies on 2017 has further complicated the situation, leaving Italy in an isolated position within the European Union.