Brussels, 06/11/2013 (Agence Europe) - The case made by European Commission representative Servaas Deroose and European Central Bank representative Klaus Masuch, in defence of their work in the troika (which also includes the International Monetary Fund) at a hearing at the European Parliament's economic and monetary affairs committee on Tuesday 5 November didn't appear to win over the MEPs.
Belgian Philippe Lamberts (Greens/EFA) told this newsletter on Wednesday 6 November that the presentation by the Commission and ECB was highly predictable and, at the same time, highly disappointing as they had not answered the fundamental questions in any detail. He said that the men were “underlings” who had told the MEPs that they simply carried out their orders and the MEPs were not talking to the right people. Deroose and Masuch seemed to be in denial of the real situation, added Lamberts, and had never explained how they were going to deal with their errors.
What had been billed as a simple hearing turned into a trial of people acting for a dark power in countries that request financial aid from the eurozone, to pick up the term used recently by the president of the EP, Martin Schulz. With sarcastic comments galore, the MEPs were critical of the way the crisis has been managed and also of the assessment presented to them by Deroose and Masuch. Belgian Derk Jan Eppink (ECR) said he had the impression that he was listening to “spokesmen for Alice in Wonderland”.
Programme architecture. Masuch said that every country in receipt of aid had made progress, which has laid the basis for sustainable growth and employment. He said that the troika provides technical advice based on its experience and its consultations with the Eurogroup, but it is the Eurogroup that decides on the granting of aid and the conditions accompanying the aid.
At the hearing, Lamberts said that the troika was not very good at economic forecasts. Eppink said they were worse than weather forecasts. Sharon Bowles, who chairs the economic and monetary affairs committee, reminded Deroose that he had overrun the time allotted for this speech, saying that his time was a little like the troika forecasts. Deroose said he understood the MEPs' concerns about the economic forecasts, adding that the Commission took the matter very seriously. He said they did their best to make them as accurate as possible but “we may fail, we aren't perfect, errors can be made” and the circumstances had made them difficult to determine. Masuch asked the MEPs to judge the forecasts in the light of the information available at the time, in the spring of 2010, when they had not been aware of the administrative and political problems in the struggling countries. These problems, he said, had led to very significant delays in the reforms and had undermined the confidence of the other countries and the markets.
Deroose said that, for Greece, they would still say that the programme design was appropriate, given what they knew at the time, although with hindsight, some things would have been done differently. Greater stress would have been laid on competitiveness, along with more upfront recapitalisation of Greek banks. Masuch said greater emphasis should have been placed on reforming the product market, despite very strong resistance from vested interested.
Democratic legitimacy. The main reason for the MEPs investigating the work of the troika was concern over democratic legitimacy and the fact that the troika did not have to account to anyone. Othmar Karas (EPP, Austria), who will be co-drafting an own initiative report on this matter, asked the representatives of the two European institutions what their role was within the troika and with regard to the member states. Deroose pointed out that the “two-pack” of legislation updating the stability and growth pact gave the EP greater powers of scrutiny over the troika and that therefore there already existed a foundation in law for democratic control of the troika's work.
That morning, when unveiling the European Commission's autumn economic forecasts, Euro Commissioner Olli Rehn mentioned the constant and regular dialogue with the EP about the structural adjustment programmes negotiated on behalf of the eurozone. The Commission is far more accountable to the EP, he pointed out, than are the ECB and the IMF. Deroose said there were different types of responsibility among the institutions in the troika, and Masuch said that the ECB played a key role in it. Although IMF did not attend this hearing, despite efforts to get a representative to come to the EP, it did come to the EP in June for a closed doors hearing about the Cypriot aid programme.
Rehn said he was prepared to contribute to dialogue that he hoped would be constructive so it could improve the way the troika works and improve the Commission's responsibility system to ensure full legitimacy of its actions and respect for democracy in Europe. Following a leaked IMF report in June on errors in the first Greek bailout, the Commission promised to publish its own report, but five months on, no progress has been made. In the light of the EP's move to assess the troika's work, an EU source told this newsletter that there didn't seem to be any point in duplicating its work. Questions that did not receive an answer at the hearing include one from Liêm Hoang-Ngoc (S&D, France), co-rapporteur on this question, who asked how much of the loans had gone to boost the Greek economy and how much had returned to the ECB in profits on the Greek sovereign bonds its owns. (EL/transl.fl)