European finance ministers agreed on Monday (30 November) to crucial reforms of the eurozone’s bailout fund, which had been put aside for a year amid reluctance from Italy and the coronavirus crisis.
The fund, known as the European Stability Mechanism (ESM), will become the bloc’s lender of last resort as soon as 2022.
It will also see its financial firepower strengthened, and its authority to supervise countries in difficulty will be increased.
Created in 2012 in the heat of the eurozone debt crisis, the ESM was used to stop countries including Greece from going bankrupt.
“There are decisions, especially at EU level, that sound so technical that it is difficult to see their political impact at first,” said German Finance Minister Olaf Scholz.
He said the ESM deal was one such decision, but added: “The ESM reform strengthens the euro and the entire European banking sector.”
Although the eurozone agreed the reforms last year, Italy’s objection initially stopped the deal and talks were then further held up by the coronavirus pandemic.
The ESM loans at a subsidised rate to states, which then have to improve their competitiveness and consolidate their public finances.
The fund became politically divisive in Italy when far-right parties painted it as a tool of control by Brussels, leading to similar statements from inside the governing coalition and an opposition to stregthening its role.