Conte ‘The Traitor’ Gets Italian Parliament To Approve a Resolution for the ESM

Dec. 12, 2019 (EIRNS)— The Italian government of Prime Minister Giuseppe Conte managed to get Parliament to approve a new resolution in favor of the European Stability Mechanism (ESM) yesterday. The resolution conditions approval of the ESM reform on approval of the entire Banking Union “package,” which includes a European-wide single deposit insurance fund, which Germany has blocked so far.

The main aspect of so-called reform of the ESM, which was formed in 2012, is, as EIR has consistently stressed, that it will become a “backstop” for bank bailouts, while at the same time functioning as a safety net for governments, as it has done in the past for Greece, Ireland, and others. The reform text says that if the Single Resolution Fund resources (capital and bail-in) are not enough, the ESM would jump in as a backstop, with a €700 billion fund provided by member states.

Conte had promised Parliament that the government would only approve the ESM if, at the same time, the single deposit guarantee fund was also approved as a “package.” However, the word “progressive” was inserted in the resolution, which means the ESM reform is approved before and without the deposit guarantee. Thus, Conte can announce today at the Dec. 12-13 EU summit that he will sign the treaty.

The resolution contains a fig leaf, promising that Parliament will be “involved” at any stage of negotiations. However, the negotiation for the ESM has already been concluded, as Eurogroup President Mário Centeno has clearly stated.

Five Senators from the government partner Five Star Movement voted against the government and are considering joining the opposition Lega.

Lega Chamber of Deputies Budget Committee Chairman Claudio Borghi called Conte a “traitor.” Senate Finance Committee Chairman Alberto Bagnai (Lega) exposed the fact that the ESM incorporates the Fiscal Compact, which is a failed policy, and he called the EU a “dying” proposition.

While those such as European Parliament Member Marco Zanni (Lega), who have correctly pointed to the fact that in a banking crisis, the ESM won’t be enough and the ECB would have to jump in, the real solution—Glass-Steagall banking separation, as opposed to perennial bank bailouts—has been excised from the debate. For the most part, the anti-ESM debate has fixated on the fact that the conditionalities for aid to governments divide the EU into first- and second-class members (indeed, they demand that countries applying for aid must have a budget deficit below 3% and a national debt below 60%—or, are in a process of debt reduction by 20% yearly; at the moment, only Germany would probably fit into the first category).

Nevertheless, the general evaluation in Italy is that the current government has been severely weakened and has an expiration date fixed for some time between January and April 2020.