Italy’s government in jeopardy over EU bailout fund
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The Italian coalition government — made up of the populist 5Star Movement, the center-left Democratic Party (PD), former Prime Minister Matteo Renzi’s Italia Viva, and the far-left Free and Equal — is just three months old but might not last the winter, with tensions reaching a peak this week over reform of the European Stability Mechanism (ESM), the EU’s bailout fund for eurozone countries.
The ESM is being revised in order to assign new tasks to the fund, including the introduction of a financial backstop to cope with bank failures. Final agreement on the revisions was expected to happen this month but Italy is set to derail those plans.
Things aren’t going to get any easier for the government partners as there are key regional elections next month (in which the PD and the 5Stars are running against each other), there’s a complicated budget law to pass by December 31, and the country remains on the EU’s watchlist for a potential breach of the bloc’s fiscal rules.
The planned overhaul of the ESM didn’t seem like a make-or-break matter for the coalition until Matteo Salvini, leader of the far-right League, put it at the top of the agenda by accusing Prime Minister Giuseppe Conte of supporting a reform that would go against Italy’s interests — and the 5Stars sided with Salvini in the fight.
