Brussels, 17/05/2013 (Agence Europe) - Going by the financial aid programmes alone and comparing reasonable expectations with the actual outcomes, the only programme to have been a clear success is the Irish one. Portugal's aid programme may also prove to be a success, but the Greek programme has failed, say three economists from the Bruegel think tank in a report published on Thursday. André Sapir, Guntram Wolff and Jean Pisani-Ferry say it would be fairer to say that the programmes have been a success in some respects and a failure in others.
The report notes that the problems with the Greek programme were due to the fact that the starting conditions were particularly unfavourable, the administrative and political systems were weaker than in Ireland and Portugal, and when Greece asked its partners for help, the eurozone was totally unprepared. The report says that economists are divided over an alternative to the austerity measures imposed, a writedown of the debt. In the Greek case, it would have been better to organise a debt writedown earlier on. The think tank says the delay will have serious repercussions at a later date, when European institutional lenders are forced to recognise that Greece is unable to pay back its debt. The writedown delays are said to have led to public lenders having to take the place of private lenders, which therefore led to a loss to the taxpayer. More than three-quarters of the Greek debt is now owned by institutional lenders. “In the Irish case, the bail-in of bank senior bondholders might have been desirable from the Irish point of view, though it would have improved the programme's sustainability far less than in Greece and it could have had significant negative implications for the funding of Irish banks.” It was of course in order to bail out its banks that Ireland was forced to call for aid from the troika (the European Commission, the European Central Bank (ECB) and the IMF) in the first place. The think tank adds: “The fundamental problem, however, was that Europe was much too slow to address its banking problems.”
One of the aid programmes' failings is the high level of unemployment, which jeopardises the viability of structural adjustments and is due as much to the austerity measures as to failings in the labour market, particularly in Portugal and Greece.
The Bruegel think tank goes on to consider the way the troika is organised. Members of the troika have managed to work together on the three countries, despite potential differences due to their mandates and differing rules. The report says that the Commission and the ECB make it a point of honour to ensure financial stability and the viability of the eurozone, but the IMF is more concerned with the programmes' success and debt sustainability in the struggling countries. It is unlikely that the IMF will withdraw from the equation, partly because the treaty establishing the European Stability Mechanism makes explicit reference to the IMF but also, the three economists say, because some countries do not have enough trust in the European institutions.
Bruegel recommends that 10% of the financing should come from the IMF to give the necessary weight needed to play a role and yet be sufficiently limited to avoid compromising its independence. This would also mean that the EU would continue to benefit from the IMF's expertise and credibility. Bruegel comments: “We would suggest that the European Monetary Fund be subject to the oversight of the European Parliament.” The think tank says the ECB's role is too vague, and the experts recommend that it should become a silent partner. (EL/transl.fl)