Rehn and Reding clash on troika’s future

Russian troika.jpg

Olli Rehn, the EU's top economics official strongly defended the 'troika' of international lenders, saying the monitoring team was essential to restoring euro zone credibility. His comments came as a rebuff to another Commission Vice President, Viviane Reding, who said the troika format should be abandoned.

Last week, the EU justice commissioner, Viviane Reding, called for the troika to be dissolved, saying it had run its course and that Europe did not need the IMF to solve its problems.

Troika is a diplomatic jargon term, meaning a triumvirate set up to help solving issues. The word originally refers to a traditional Russian three-horse sleigh.  

The International Monetary Fund, European Central Bank and European Commission, known as the troika, have become a target in protests. In Greece, people have paraded banners reading "Unite against the troika!" in challenging thousands of public-sector job cuts demanded in return for its bailout program.

But Rehn retorted on 18 July that the three institutions worked well, "often in the most challenging of situations". Any reassessment of how it operates, he said, was for the future only.

"The troika was set up on the initiative of the euro area member states in 2010 as a key element of our response to the crisis facing Greece," he said.

"None of these situations are easy," he said, referring to the programs in Greece, Portugal, Ireland and Cyprus that the troika is now overseeing. "But that makes it all the more important that we can draw on the combined and complementary expertise of three institutions."

Many Europeans believe the budget cuts mandated by the troika have exacerbated the euro zone's longest recession since the single currency's creation in 1999.

Tensions within the trio burst out into the open last month, when an IMF report blamed Europe for mishandling Greece's first bailout in 2010, arguing that the troika would have done better to restructure Greece's debt rather than burden taxpayers with the cost of keeping the country afloat.

Both Rehn and European Central Bank President Mario Draghi rejected that assessment, arguing that any failure to stand behind Greece at the time would have alarmed already nervous investors, something that could have destroyed the euro zone.

Christine Lagarde, the IMF's managing director, has also sought to play down the tensions, telling reporters last week that the troika has "a very solid, friendly, constructive relationship that personally I am very proud of".

Rehn said, however, he was open to looking at new ways to develop euro zone governance, particular from 2016 when the troika is expected to finish its work in Cyprus, which took a bailout in March.

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