The non-ratification of the reform of the ESM by the Italian Parliament and the dilemma of the vincolo esterno

Giovanni Zaccaroni (University of Milano-Bicocca)

The existence of the vincolo esterno (‘external constraint’) has been crucial to ensure the alignment of Italy to the EU’s economic and monetary policies. It is also helpful to explain, this time, the reason why the Italian Parliament did not authorise the ratification of reform of the European Stability Mechanism (ESM).

The importance of the ‘external constraint’, that can be traced even into the Italian Constitution (art. 11 expressly agrees “to the limitations of sovereignty that may be necessary to a world order ensuring peace and justice”) and that was subsequently developed by Guido Carli, proved to be an effective tool to overcome the fragmentation of Italian usually weak parliamentary majorities and to ensure that Italy implemented much-needed economic and monetary reforms.

The ‘external constraint’ thus identifies the existence of a superior international or supranational rule that the national law and policy makers cannot derogate, under pain of being excluded from the process of European (economic) integration. In case of reluctance to the process of alignment, the political leaders would have to take a step back and leave the job to implement the economic and monetary reforms to a governo tecnico, an executive usually made by academics and experts and chaired by an internationally recognized figure.

In 1997, alignment with the convergence criteria to join the euro was ensured by former Italian Central Bank governor and then Finance Minister Carlo Azeglio Ciampi and by Prime Minister (PM) Romano Prodi (later President of the European Commission). In 2011 it was then the turn of PM (and former European Commissioner) Mario Monti to ensure Italian alignment with EU budgetary constraints. PM Mario Monti also promoted parliamentary ratification of the first version of the ESM Treaty (still in force). And finally, thanks to PM Mario Draghi, Italy secured the largest share of the post-pandemic Recovery and Resilience Facility. These ‘technical’ governments were possible due to the lack of a strong parliamentary majority emerging from the general elections.

The vincolo esterno worked excellently in prompting much needed but less popular economic reforms, as long as it was enforced by technical experts and within a fragmented political landscape. The ‘external constraint’, however, was first challenged in 2020, with the reform promoted by the 5 Star Movement in the constitutional law n. 1 of 19 October 2020, that reduced the number of members of the Parliament from 950 to 600. To reduce the number of MPs means also to reduce the absolute number of MPs required to support a government, thus making it easy for a political majority to remain in power.  Then, in 2022, Giorgia Meloni emerged with a clear majority and political mandate from the general election, with the ambition to mark a difference from the stance of the previous governments towards the EU. This time, however, with the necessary parliamentary support to remain in power seemingly until the end of the legislature in 2027.

The lights and shadows of the ESM reform are known, and I have written my views here. The ESM is not a purely EU law instrument, rather a hybrid one – an intergovernmental instrument that should align with EU law – thus every amendment should be agreed by all the parties (in this case, the eurozone Member States), making its reform a very difficult endeavour. Despite its problematic aspects, the ESM reform is very important, in particular for the stability of the banking sector, as it provides for the powerful ‘backstop’ to the Single Resolution Fund to be activated in the case of a systemic banking crisis.

The establishment of the ESM back in 2012 was, for Italy, a typical situation of ‘external constraint’: a deep economic crisis coupled with the fragmentation of the political majority, and the concrete risk of a colossal sovereign debt crisis.

In the current political situation, the strong parliamentary majority that supports Giorgia Meloni voted not to authorize the ratification of the reform of the ESM with a majority of 184 votes. Despite a variety of explanations, the reason underpinning the Italian lack of ratification of the ESM reform seems a purely political one. The Italian Parliament sends the message that it rejects the ‘external constraint’ and that a political dialogue should instead take place on the content of the ESM reform, although someone would say that perhaps a less ambitious political exchange with the content of the Stability and Growth Pact would have sufficed.

It is not the first time that, for Italy, the external constraint proves insufficient to foster alignment. However, this time the novelty is that it might not be an exceptional situation and that future EU related reforms will not have to take for granted, as it used to be, the Italian support.

Giovanni Zaccaroni is assistant professor of EU law at the University of Milano-Bicocca.


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