For the moment, though, the issue remains on the table at the summit and talks are continuing, with focus on two elements: the conditions to be imposed upon the recipient country and the mechanism's firepower. A stand-off regarding the first issue has emerged in the last few days, with Angela Merkel hinting that the resources of the state-saving fund are available to all member states as long as the conditions set out in the charter are respected. The terms are very clear: any country that asks for aid from the fund must sign a memorandum of understanding with the EU Commission, which, after sounding out the ECB and the IMF, demands certain commitments in return. For the country benefiting from the aid, this means the arrival of the troika, which is exactly what Italy wants to avoid, as Monti has stated publicly. On the other hand, Italy has asked that the "virtuous" countries, those with certain characteristics (an absence of infraction procedures on public accounts, primary budget surplus, progress in terms of structural reforms etc) be able to receive support from the anti-spread mechanism automatically, therefore every time that interest rates pass a given "ceiling".
The purchase of public bonds on the secondary market by the mechanism would increase demand, and in so doing cool interest rates, with a subsequent fall in the spread, the differential between the bonds of the country in question and the German bund. Diplomatic sources say that Italy is prepared to negotiate on the latter front, particular on the term "compliant", when a country respects certain criteria that make it "virtuous". Berlin, however, is holding firm on its position for the time being.
The other sticking point opposing Rome and Berlin concerns the so-called "munitions". Mario Monti believes that the resources of the state-saving fund (currently the EFSF and soon to be the ESM) are not sufficient. Once all aid already allocated to struggling countries has been deducted, the "firewall" has a total of around 500 billion euros, with other calculations putting the figure at 700 billion. The amount is not huge if speculation is to be stopped and markets reassured. For this reason, Monti would like the European Central Bank to be part of the mechanism.
Italy's proposal on this point has never been released in detail, but different sources suggest two possibilities. One is to leave the ECB the task of buying bonds on the secondary market, giving the fund the role of "guarantor" should problems arise, while the other, to which Berlin has repeatedly expressed its opposition, is to give the fund a "banking licence" that would allow it to take on longer-term refinancing operations (LTROs) from the ECB like any normal bank.
Germany is against this measure, too, viewing it as a ploy to sidestep the ban on the ECB financing states. (ANSAmed).