Ignazio Visco: The functioning of the European Stability Mechanism and the prospects for its reform

Testimony of Mr Ignazio Visco, Governor of the Bank of Italy, at the Joint session of the V Committee (Budget, Treasury and Planning) and the XIV Committee (European Union Policies) of the Chamber of Deputies, Rome, 4 December 2019.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Presidents, Honourable Members of Parliament, I am grateful to the Fifth and Fourteenth Committees of the Chamber of Deputies for this invitation to debate the proposed reform of the Treaty establishing the European Stability Mechanism (ESM). The proposal is the result of a provisional agreement reached last June, based on the Euro Summit understanding of December 2018. As with the Treaty currently in force, it will only take effect once it has been signed and ratified by all Member States.

The ESM was introduced in 2012 to bridge one of the gaps in European economic governance: its core function is to grant conditional assistance to euro-area countries that are experiencing temporary difficulties in raising funds on the market, despite having sustainable public debts. Alongside this function the proposed reform introduces a backstop to the Single Resolution Fund (SRF), within the bank crisis management framework.