The European Parliament backed two resolutions on Thursday (13 March) criticising the lack of democratic accountability of the 'Troika' of international lenders, calling for the creation of a European Monetary Fund to assist over-indebted countries.

Although they recognise that the Troika has “helped avoid further deterioration of the economic situation”, the two non-binding reports – one drafted by the Parliament's economic and monetary affairs committee, the other by the employment and social affairs committee – are nonetheless very critical of the methods of the Troika, and its lack of democratic accountability.

The so-called Troika of international lenders – made up of the European Commission, the European Central Bank, and the International Monetary Fund – is involved in follow-up reforms, agreed to in exchange for financial assistance, for Greece, Ireland and Portugal.

"The three independent institutions of the Troika had an uneven distribution of responsibility between them, coupled with differing mandates, as well as negotiation and decision-making structures with different levels of accountability, all resulting in a lack of appropriate scrutiny and democratic accountability as a whole," the text says.

The European Parliament’s inquiry also criticises the “overly optimistic assumptions made by the Troika” and the lack of results of the programme.

>> Read: Parliament seeks tougher controls on Troika

MEPs found that the conditions imposed on bailed-out countries have negative social consequences due to a lack of a “proper impact assessment” on citizens such as cuts in healthcare, increased unemployment, youth migration and rising poverty.

The Parliament also blamed EU finance ministers and the Eurogroup for "failing to give clear and consistent political pointers to the Commission and for failing to shoulder their share of responsibility in their capacity as final decision-taker".

A European Monetary Fund

These conclusions have led MEPs to propose a “European monetary Fund”, which would take over the role of the European Commission. The ECB would be a “silent observer”, while the IMF’s participation would only be “optional”.

MEPs would like to see this new body enshrined in EU law.

“In the short-term, the Troika needs internal rules of procedure to increase the transparency of decision-making," said Othmar Karas, an Austrian centre-right lawmaker who authored one of the two Parliament reports.

"In the long-term, the Troika's work should be carried out by a new European Monetary Fund on the basis of EU law," Karas said in a statement. "This ensures that European decisions on the reform and aid programmes are democratically legitimised and subject to parliamentarian scrutiny. Only in this way will the citizens’ acceptance increase."

Further recommendations, include putting in place transparent and binding rules for the interaction of the Troika, and an improved communication strategy. Furthermore, MEPs want the EU to have a 'plan B' “should assumptions prove wrong”. Bailed-out countries should also have a “growth task force,” says one of the reports.

The other report, which focuses more on social issues, asks the EU to balance the macroeconomic aspects of international lending programmes with social considerations.

“Member states and the EU should put in place a job recovery plan once the worst of the financial crisis has passed, taking particular account of the need to create favourable conditions for small firms,  for instance by repairing the credit system,” the MEPs conclude.