Italian Economy Minister Roberto Gualtieri said on Tuesday that the euro zone’s bailout fund, the European Stability Mechanism, should be used to help economies hit by the coronavirus crisis, with no strings attached.
Some richer northern euro zone nations have expressed unease about making the fund available without policy conditions aimed at making its recipients more economically competitive.
“We must use all the resources available at the EU level, including the ESM, without any conditionality,” Gualtieri told parliament. Gualtieri’s position is also different to that of some members of the ruling coalition in Rome, who do not want Italy to use the ESM at all, arguing it would saddle the country with long term debt that would be hard to repay.
Euro zone finance ministers are due on Tuesday to discuss proposals by the European Commission to deploy the fund, which has 410 billion euros ($444 billion) of unused lending power, as a coronavirus cushion.
Italy has borne the brunt of the outbreak in Europe, and earlier on Tuesday Antonio Misiani, Gualtieri’s deputy minister, told Reuters the only acceptable conditionality should be that the ESM cash is used “to manage the health and economic emergency.”
Misiani, like Gualtieri, is from the center-left Democratic Party, but its coalition partner, the anti-establishment 5-Star Movement, is reluctant to deploy the ESM, fearing it would place tougher fiscal obligations on Rome and impinge on national sovereignty.
“The ESM doesn’t work. Using this instrument to take on a debt for decades is absolutely not in our interests,” Raphael Raduzzi, a 5-Star member of the parliamentary finance committee, told Reuters.
In a bid to stop a pandemic-induced financial rout from shredding the euro zone’s economy, the European Central Bank last week launched a 750-billion-euro emergency bond purchase program and said it was ready to do more if necessary.
The ESM could unlock unlimited ECB sovereign bond purchases through the ECB’s Outright Monetary Transactions program (OMT). To provide the credit, the ESM would have to borrow on the market via what officials say would be called “coronabonds,” to make clear money from the operation would go only towards fighting the effects of the epidemic.
Currently, the ESM can help euro zone countries only on condition they adjust their economic policies to overcome the problems that led them to seek financial assistance.
Both Germany and the Netherlands have said they do not favor ESM loans without such conditions. More people have died of COVID-19, the disease caused by the new coronavirus, in Italy than in any other country. The toll rose by 602 on Monday to 6,077.
Italy’s Treasury has estimated its economy will contract by around 3% this year due to the lockdown imposed to fight the outbreak, sources said last week, while stressing that the situation was highly uncertain and subject to downside risks.
Gualtieri said in his testimony to parliament on Tuesday that he expected a steep fall in gross domestic product in the first half of the year, and a full year contraction of “a few percentage points.” He did not provide figures.
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