Meloni says Italy not ready to pass reform of euro zone bailout fund

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ROME (Reuters) – Italy’s Prime Minister Giorgia Meloni said on Wednesday “further reflection” was needed before her government could ratify a reform of the euro zone’s 500 billion euro ($526.15 billion) bailout fund for countries and banks cut off from markets.

Meloni, who has often aired concerns about the European Stability Mechanism (ESM), told the Italian parliament that her government would never access the facility and said it should instead be turned into an industrial policy tool.

Italy is the only European Union member dragging its feet on ratifying the reform.

A number of Italian politicians, including Meloni, have attacked the reform in the past, saying it would increase the risk of a restructuring of Rome’s huge national debt.

“If we believe the new ESM regulation is not in the national interest of the country … it should be the time to discuss using it as an instrument of European industrial policy,” she said, echoing the view of industry lobby Confindustria.

Under the reform agreed at the EU level in 2021 but still not ratified, the ESM would provide a backstop to the Single Resolution Fund, which is responsible for dealing with failing banks in the context of the European Banking Union.

It would also make it more straightforward to restructure countries’ national debts in case of need, something that critics in Italy fear would make such a restructuring more probable.

The ESM normally requires countries to adopt austerity or financial reform programmes in return for its support.

“We want to discuss the general framework of European (economic) governance and the possibility that the resources, which today are being allocated to the ‘bailout,’ can really be useful to the states,” Meloni said.

The ESM was created in 2012, replacing a temporary fund established in 2010, at the height of the euro zone’s sovereign debt crisis. To date, five countries have turned to it for support: Greece, Ireland, Portugal, Spain and Cyprus.

“As long as I am prime minister, Italy will never make use of the ESM,” Meloni said. “And I fear that nobody else will be able to make use of it either.”

($1 = 0.9503 euros)

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