The main things to know about the Mes

It has been discussed for a long time and with great confusion: today parliament is voting on the modification of the European Stability Mechanism. But health care loans have little to do with it. Here's what's at stake

(photo: Antonio Masiello # POOL / Augusto Casasoli / POOL via Getty Images) Today, 9 December, parliament votes on the reform of the European Stability Mechanism (Mes), an instrument created in 2012 to try to help Eurozone countries ensure their financial stability. The vote will take place after the Prime Minister Giuseppe Conte has gone to the Chamber of Deputies and the Senate to illustrate the communications approved by the government in view of the European Council on 10 and 11 December. The MES is a topic that has caused a lot of discussion in Italian politics in recent years, generating not a little confusion in public opinion. Let's try to line up what needs to be known, so as not to make mistakes.

What is the Mes?

It is an intergovernmental organization of the member states of the European Union who have adopted the euro as their currency, with the aim of supporting those countries that are in economic difficulties to avoid repercussions on the entire Eurozone. Through a common fund, the MES lends money to countries that are struggling to access financial markets, ensuring sustainable interests thanks to the guarantees provided by its members.

The problem raised by the international community is represented precisely by the conditions that states EU must accept to access funding. Without going into too specific, in the rare times that it has been employed in Greece, Portugal and Spain, the ESM has been accused of excessive interference in national economic policies, often imposing reforms considered too drastic by loan applicants.

Why is it talked about in relation to the fight against the Covid-19 pandemic?

The mechanism has recently been given the possibility of providing credit to finance health interventions and fight the pandemic of coronavirus, as it is considered a quicker tool in mobilizing funding (especially now that the Recovery Fund has been blocked by the veto of Hungary and Poland).

But be careful not to get confused: the reform under review by parliament it does not concern loans to deal with Covid-19 - which Italy would be entitled to to the extent of 36 billion euros, that is 2 percent of GDP - but rather the mode of operation of the Mes.

What does it then envisage this reform? And how does it work?

It has been discussed since 2018 - when Italy was opposed, with the first Conte government - but only on 30 November did the economics ministers of the Eurozone countries reach an agreement on first phase of modification. Now the reform is under discussion in the parliaments of the various states, which will have to approve it unanimously.

The changes considered are basically two: the creation of a single resolution fund to help European banks in difficulty - endowed with an availability of 55 billion euros made available by the same banks, starting from 2022 - and the obligation for a country that asks for ESM funding to issue the so-called single limb Cac, special government bonds that could allow creditors to decide on a debt reduction through a simpler procedure than other types of securities.

What do the tensions around the ESM mean for our government?

Even if the vote on the Mes is not a vote of confidence on the Conte bis government, in the majority of recent strong tensions have been felt, especially from the 5-star Movement, which considers the fund as an instrument of interference by the institutions European institutions in national prerogatives and, more generally, made it one of its sworn enemies, reiterating its no to its use.

If in the vote on the Mes on the evening of 9 December, the government should lose the majority in parliament, he would then have great difficulty in pursuing his own political agenda, and indeed would risk opening up a political crisis.