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Italy working on amendments to ESM reforms: government source

FILE PHOTO: League party leader Matteo Salvini speaks during an anti-government demonstration in Rome, Italy, October 19, 2019. REUTERS/Remo Casilli/File Photo

ROME (Reuters) - Italy is working on proposals it believes would improve reforms to the European Stability Mechanism, the euro zone bailout fund that was provisionally agreed in June and which must be finalised next month, a government source said on Monday.

Italy has been against proposals to turn the ESM into a version of the International Monetary Fund which would make support for countries in financial crisis conditional on their agreeing to debt restructuring.

Asked whether Italy was trying to improve the text due to be approved in December, the source said: “Yes, every country is negotiating things that work for them.”

In June, European finance ministers reached a broad deal on reforming the ESM, including easier access to precautionary credit for countries facing market difficulties and an accord on how to establish whether a country’s debt is sustainable.

With doubts growing over the stability of Prime Minister Giuseppe Conte’s coalition government, grouping the center-left Democratic Party and the anti-establishment 5-Star Movement, the issue has become increasingly sensitive politically.

Matteo Salvini, the leader of the right-wing opposition League party and a frequent critic of strict EU budget rules, accused Conte of “betrayal”.

“If anyone has approved it while keeping the People in the dark, it should be remedied immediately. Otherwise it would be HIGH TREASON,” he said in a tweet.

The League is particularly angered by conditions in the June deal that would include “conditionality in the form of a macro-economic adjustment program” that would in some cases force countries receiving aid to agree to outside oversight, possibly involving the IMF.

Conte’s office rejected Salvini’s comment as “false and unfounded”, saying the ESM accord had not been signed and that parliament would in any case be consulted before it was. The June accord was passed when Salvini himself was in government as minister of the interior, it said, and noted that parliament has a veto power on approval of revisions to the ESM treaty.

Reporting by Giuseppe Fonte; editing by James Mackenzie and Timothy Heritage