Europe is confident that Italy's ratification of the reform of the European Stability Mechanism will take place next week. "We have received indications from Minister Giancarlo Giorgetti that the process of ratification of the ESM will be discussed by Parliament next week." And among the Eurozone finance ministers "many have expressed hope that this week will be a success for this ratification": It is the director general of the ESM, Pierre Gramegna, who announces the expectation of a white smoke from Italy on the controversial and politically sensitive issue of the former 'Save States' fund. Moreover, everything is held in a turning point that is expected in addition to Rome or at least possible also in Brussels on the reform of the Stability Pact. After months and months of negotiations, in fact, this evening the revision of economic governance comes to the final confrontation in an Ecofin dinner organized with an open duration, therefore to the bitter end.
"We have warned ministers that the night will be long and our goal is for a political agreement to be reached at this meeting," said Spanish Deputy Prime Minister Nadia Calvino, who holds the EU's rotating presidency. However, the forecast is that of a tight tug-of-war with an outcome that is by no means a foregone conclusion. So much so that the EU Commissioner for the Economy, Paolo Gentiloni, gives him just a "51%" chance of success.
"Everyone is coming to this meeting with a positive and constructive attitude and Italy is no exception," said an EU diplomat over the possibility of Rome vetoing some points, protecting investment and against unenforceable austerity. "There are still differences between member states on fiscal rules, but if everyone approaches this process in a constructive way, I think they can be overcome," said EU Commission Vice-President Valdis Dombrovskis. The approach of the reform is well known: it envisages spending plans of the States over 4-7 years with technical trajectories calculated by the Commission for the repayment of debt and deficit. If the deficit exceeds 3% of GDP, an annual structural adjustment of 0.5% of GDP is automatically triggered. Or at least it should, because the point seems surprisingly back in negotiations at the explicit request of France: French Finance Minister Bruno Le Maire would be "reasonable" to think of a way to "encourage investment and structural reforms, introducing a flexibility that could be 0.2 points per year".
For the rest, there is a "90% agreement" with Germany on the Pact, he said. But with rules preventing investment, "there will be no innovation, productivity and growth in Europe," he warned. "This principle is an absolute red line." However, the German 'hawk' Christian Lindner tried to quickly close the issue - "originally there was an agreement not to touch the deficit procedure" - but only overnight will it really be clear who has prevailed. In return, Paris seems to have opened up to the magic word of structural adjustment, which it no longer asks to be only "primary", i.e. without considering interest on the debt. In the European Parliament, meanwhile, the ECON rapporteurs have reached an agreement on the reform, which will go to the vote in the Commission on December 11 and as expected in plenary on January 17. "We believe that we will have a majority because we have the support of the S&D, the EPP and Renew," explained one of the ECON rapporteurs, Margarida Marquez. The EP does not provide for safeguards on the deficit, and also rejects the idea that the deficit procedure should be opened automatically, while on the reduction of the debt there is talk of a time frame of 14-17 years.
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