Italy's government will attempt to get a vote in parliament next week to decide on reform of the European Union's bailout fund, as divisions within Rome's ruling coalition deepen.
The ruling 5-Star Movement opposes signing off on the reform until plans for a wider European banking union became clearer, while the co-ruling Democratic Party (PD) supports the plan.
The coalition infighting could hinder plans by the euro zone's 19 member states to reach a political agreement on reforming the European Stability Mechanism (ESM) this month.
The proposed reform of the ESM would give it more powers to handle financial crises, increasing the euro zone's monitoring powers over countries with economic imbalances and if required facilitating the restructuring of government debt.
Prime Minister Giuseppe Conte met key government officials on Sunday in an attempt to settle the dispute, but failed to find a final agreement. "Any decision over the ESM will become definitive only after the Parliament resolutions that will be approved on Dec. 11," a source at the Prime Minister's office said after the meeting.
Rome wants assurances that sovereign bonds would not lose their status as risk-free assets with the European banking union, a government source told Reuters., in exchange for its green light on the ESM reform.
"Italy is ready to put a veto on that point," the source said, adding that Economy Minister Roberto Gualtieri had been given a mandate to negotiate with his European peers at the Eurogroup meeting scheduled for Dec 4. Conte is due to address Italy's parliament on Monday on the ESM reform.
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