(Bloomberg) — Italy’s parliament rejected ratification of a European Union bailout fund, dragging out a populist clash with partners in the bloc that is isolating Italy.
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Lawmakers of Prime Minister Giorgia Meloni’s far-right Brothers of Italy party, as well as of coalition partner the League, voted Thursday against ratification of reforms to the European Stability Mechanism. The center-right Forza Italia, the junior coalition partner, abstained. The lower house rejected ratification by 184 votes to 72.
In addition to causing strain within the EU, the issue reflects a populist move including by the anti-immigrant League. Its leader Matteo Salvini, who is also a deputy premier, was quick to praise the vote. “The Italian parliament rejects the ESM. Italian pensioners and workers won’t be at risk of paying for the rescue of foreign banks,” Salvini commented on Instagram.
The bailout fund has been politically toxic in Italy for years, with successive governments unable to ratify reforms agreed to by the other euro-area states. Detractors argue that using it would increase the risk of a restructuring of the nation’s mammoth public debt.
The parliamentary vote could be an opportunity to start discussing new changes to the treaty governing the ESM, according to a government official.
Meloni’s coalition earlier Thursday presented and backed an opinion paper to the house’s budget committee which counseled against ratification.
Italian Finance Minister Giancarlo Giorgetti, a League member, had told his EU partners that the matter would be addressed and had raised hopes that a ratification was finally possible.
Separately, EU finance chiefs ended months of wrangling over fiscal rigor to agree on new stability and growth pact rules Wednesday. Each country obtained some concessions with countries like Italy getting more flexibility for fiscal adjustments, while the more hawkish EU members succeeded in introducing safeguards to ensure common debt reduction and the building up of buffers to absorb future shocks.
Finance Ministry Undersecretary Federico Freni said in November that Italy wouldn’t vote on the ratification of the ESM until after new fiscal rules were approved.
The fund was set up in 2012 to help euro-area economies in exchange for strict reforms. Meloni has said in the past that Italy will never tap it, but the country’s European peers have asked her to approve the backstop even if she doesn’t plan to use it, to allow other countries to access the fund.
(Updates with official in fifth paragraph)
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