Four years after the start of the debt crisis in Europe, the economic and financial committee of the European Parliament has started a series of hearings of the main actors of the Troika - the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) - who will have to explain how they managed the crisis in the four countries where they were the primary lenders, Portugal, Ireland, Greece and Cyprus.
This week, in Strasbourg, MEPs interviewed the commissioner in charge of economic and monetary affairs, Olli Rehn, ECB president Jean-Claude Trichet and the European Stability Mechanism (ESM) chief, Klaus Regling, as part of the investigation. Only the IMF's representative has not been heard yet.
“We are currently visiting all countries that are under assistance and we are seen as the only ones who can talk with the Troika on equal footing,” French MEP and co-rapporteur Liêm Hoang Ngoc (S&D) said in an interview with EurActiv France and Greece.
After having visited Portugal and Cyprus, the parliamentary delegation in charge of the investigation report will visit Ireland on 16 and 17 January and them Greece at the end of January.
Democratic legitimacy of the Troika
The democratic legitimacy issue remains central to the MEPs’ investigation and mainly the lenders’ interference in the austerity programmes meant to reduce the countries’ deficits.
“In Portugal, for example, an agreement was reached between the unions and the employers for a minimum wage of €500 monthly, but the Troika rejected it,” Hoang Ngoc explained.
“First of all, nobody is dictating its law: decisions are taken with the agreement of the beneficiary countries that are responsible before their parliament,” Rehn replied.
Disagreements on the Troika’s efficiency
As results are being drawn up, opinions are very divided on the efficiency of the Troika’s actions.
“If nothing had been done for Greece, the impact of the crisis would have been undeniably worse for this country,” the ECB chief claimed, supported by Rehn and many MEPs from the centre-right EPP and ALDE.
However, many think that the decisions taken at the time underestimated the impact austerity policies would have on growth.
“The programmes did not fulfill their objectives of reducing public debt and boosting competitiveness,” the draft report says, asking a revision of the adjustment programmes to make them more realistic and spread over a longer time period.
The hearings highlighted some level of disagreement between the Troika members during the decision making process: while the Commission and the ECB were more in favour of stabilising the budget, the IMF wanted to put an emphasis on structural reforms.
“At the end, we did both which had a negative impact on growth,” Hoang Ngoc said.
“Each of the three institutions has its own philosophy in terms of economic policy, whether we like it or not. With the unanimity rule inside the Troika, we sometimes had to push the limits of our own economic philosophies in order to reach an agreement on the programmes,” Olli Rehn admitted.
Today, “growth is fumbling but debt rates are superior than the rates those countries had before the rescue packages”, the Socialist co-rapporteur says.
“Even if they come back on the markets, the debt sustainability is even worse than before,” he continues.
In Olli Rehn’s opinion, the intervention of the Troika was fruitful: "Ireland ended its programme in December and Spain is following for the bank sector.”
The parliamentary investigation aims at increasing the Troika’s legitimacy and democratic control over it. The aim is not to suppress it altogether, but rather to suppress it under its current form.
“Let’s be clear, we are not in favour of suppressing the Troika,” Hoang Ngoc explained.
“In the current circumstances, the view of all partners is that this body functions reasonably well in difficult situations. The three institutions should continue to collaborate in the near future,” the Commission said.
However for the leader of the Socialists in the European Parliament, Hannes Swoboda, the lack of sensitivity about social issues in these three institutions calls for a “dismantling”.
The IMF, the only non-EU institution in the troika, did not appear at the hearings and its very participation in them is still under debate.
“The real issue now is whether the Troika will continue with or without the IMF,” the French co-rapporteur says.
MEPs asked for a stronger role for the Parliament in eurozone governance, an idea supported by Trichet.
“If a country refuses entirely to implement the economic measures in the framework of the growth and stability pact … that country should be able to ask from the EP to decide in consultation with the national parliament,” the ECB president proposed.
For Rehn, the governance of the Troika will be part of a broader debate concerning the deepening of the economic and monetary union, which can only be the fruit of a well-established democratic process.