I am bit confused about this ESM idea too. There are a number of important conditions to be met for this proposal to be useful if at all (thread). @JKirkegard
Member States cannot face any conditionality for applying/benefiting from this credit line otherwise it is really just introducing a control of national policies that is entirely inappropriate at this point.
If it is a credit line, it means Member States will need to reimburse it, so Italy's debt increases. There is therefore no mutualisation of debt, just pooling of risk that reduces borrowing cost, something that the PEPP can achieve.
If the credit line is in fact a grant to countries that need it, or to European policies that require resources, it is useful but then it will need to be paid back with European resources (own resources, or Member States contribution?).
It doesn't need to be reimbursed if it is monetized, which would require a new programme by the ECB that commits not only to buy but also to never sell these ESM bonds (something the ECB has not done for the PEPP or the PSPP).
If the ECB agrees to monetisation (commitment to buy and never sell), it will indicate that it has not agreed to do that for the PSPP/PEPP and will show a weaker backing to Sovereign Paper than to ESM paper.
All in all, the eurogroup would take an important risk by agreeing to a new ESM/OMT credit line. It would send the signal that it is not standing behind the PEPP and would not do much in the way of preparing a real Coronabond that mutualises Europe's fiscal response to the crisis
