Brussels, 14/01/2014 (Agence Europe) - The debate on the democratic legitimacy of the troika of lenders (European Commission, European Central Bank, International Monetary Fund) went in circles on Monday 13 January when Euro Commissioner Olli Rehn attended a hearing at the European Parliament about the work of the troika in the eurozone countries in receipt of aid.
The MEPs kept saying that they wanted to improve the troika's democratic legitimacy and scrutiny of it.
But Rehn said that the responsibility for decision-making on the aid programmes was shared among several players. Firstly, it's the countries concerned that are responsible for letting the macroeconomic imbalances develop in the first place. Echoing him, former ECB president Jean-Claude Trichet said on Tuesday 14 January that the big countries had refused to allow application of the stability and growth pact, thus setting a bad example.
Rehn said the criteria for the granting of aid were not dictated by anyone, but were decided with the country that was due to receive the aid. Any decisions, he added, are, ultimately, the responsibility of national governments, which are accountable to their parliaments. Strong ownership of the structural adjustment programmes is the key to success, he added, as Ireland demonstrates (it exited its aid programme in December). The Commission has often pointed out that the Greek programme's failure to remain on track is why it is taking so long to get results.
Within the troika, the Commission acts on behalf of the eurozone, which meets as the Eurogroup and validates the aid plans in a unanimous vote. In October 2013, the president of the Commission, José Manuel Barroso, pointed out that the Commission had to work with the resources provided by the member states, and austerity came from calculation of the aims to be met and the scale of the cash lent by the eurozone (see EUROPE 10946).
Rehn noted the conditions under which the troika had been established and had to work. In response to criticism from MEP Derk Van Eppink (ECR, Belgium), he said that errors had been made in projections of both debt and growth, which demonstrated the limits of the economy and econometrics. Trichet, too, said that the EP's investigation should be viewed against the backdrop of the worst crisis since the Second World War and that there was not any economic model in existence that could have predicted the crisis.
No democratic deficit? On the question of democratic scrutiny and legitimacy, although the troika was set up in tragic circumstances and under terrible time pressure, explained Rehn, it has changed since then and the troika's work is now covered by the treaty establishing the European stability mechanism (ESM) and the two-pack of new rules for the stability and growth pact. In addition, the troika regularly reports back to the Eurogroup.
On the IMF's role, the commissioner said that the IMF representatives at the troika were accountable to the IMF management board. On Tuesday 14 January, EP co-rapporteur Liêm Hoang-Ngoc (S&D, France) recognised that eurozone nations were members of the IMF and that the aim was not to somehow get rid of the IMF. Rehn noted that some countries, like Germany, feel the IMF's presence is crucial.
In the light of the EP's concerns about a possible conflict of interests between the role of the ECB and the role of troika, Trichet said that the ECB was not part of the troika decision-making process.
Focus should be on making ESM a “Community” instrument? Summing up, Rehn said that, in the debate on deepening economic and monetary union, integrating the ESM into the Community process made sense and the Commission had argued this despite opposition from various countries. The other co-rapporteur, Othmar Karas (EPP, Austria) said that this was the true bone of contention for MEPs.
In a debate that moved beyond the simple institutional question, the MEPs demanded that various decisions be explained. Philippe Lamberts (Greens/EFA, Belgium) criticised the fact that, in 2010, the Commission had made a political choice by joining the ECB's opposition to a restructuring of the Greek debt, leaving the Greeks to pay the price. Only French MEP Jean-Paul Gauzès (EPP) put things into context, asking what would have happened if the eurozone had not intervened at the worst point of the sovereign debt crisis? Arguing that the troika was only a technical question, the head of the ADLE Group, Belgium's Guy Verhofstadt, called for greater focus on basic reforms. (EL and CG/transl.fl)