Brussels, 15/01/2014 (Agence Europe) - In the short-term, the International Monetary Fund (IMF) should remain in the troika of lenders with the European Central Bank and the European Commission to deal with financial aid requests from eurozone nations but, in decades to come, the Commission could do the job on its own, with the financial support of the European Stability Mechanism (ESM), argued Klaus Regling, Director General of the ESM, at a public hearing on Wednesday 15 January before MEPs on the European Parliament's economic and monetary affairs committee. The MEPs will issue preliminary conclusions on Thursday 16 January.
Regling said the IMF had to be kept on side for the moment, as it provides valuable know-how and finance, but the finance side is diminishing. The IMF only provides 10% of the financing of the Cypriot aid plan, compared with a third of the bailout for other countries, but Regling says that, in future decades, the Commission could do this itself, backed by the ESM when it comes to finance. The Commission has proved itself in terms of finance and credibility. On 14 January, the former head of the European Central Bank, Jean-Claude Trichet, said he hoped the troika would disappear and that new financial surveillance instruments could be set up to ensure prevention rather than cure. Regling said that a change in the EU treaties was possible to make the ESM a proper Community body, but that shouldn't be done until the crisis is over. He said that the medicine prescribed by the troika worked well, as was shown by positive developments in countries in receipt of aid recently, like Ireland's new-found financial autonomy. On the question of democratic legitimacy, he said that the troika recommended action rather than imposing it. Democratic scrutiny was done, he said, by national governments and parliaments rather than the EP, and this reflected the fact that the financing of the programmes by the financial markets is guaranteed by the national budgets of the eurozone, not the EU as a whole.
The president of the European Parliament, Martin Schulz, said he was staggered at the description given on Monday by Euro Commissioner Olli Rehn when asked about democratic control of the aid process. When asked who the troika was accountable to, he said the Commission was accountable to the member states, and the ECB and the IMF to their boards. Schulz said this would feed the EP's concerns about lack of accountability. (EL/transl.fl)
Dijsselbloem sets things straight. In a letter published on Tuesday 14 January in response to an EP questionnaire, the head of the Eurogroup, Jeroen Dijsselbloem, set matters straight about the legitimacy and democratic scrutiny of the aid process for struggling eurozone nations, which is currently being examined by the European Parliament. He said there was a very high level of government and parliamentary control of the terms of the macroeconomic adjustment programmes at national level and flexibility had been shown in dealing with the unexpected challenges. Budget adjustment requirements were modified when necessary. In their responses to the MEPs, the countries in receipt of financial aid broadly described a constructive working environment with the troika. The Portuguese and Cypriot finance ministers said that troika representatives had held meetings with national parliamentarians. The Irish central bank says that most of the things agreed for the financial sector mirrored existing national policy but that certain other areas were “non-negotiable” for the troika. The Cypriot government commented: “The most controversial aspect of the final negotiation was the application of the bail-in instrument on bank deposits. The Cyprus government was forced to accept this measure under duress. In general, discussions are held on the basis of rational arguments and in a constructive spirit, with a view to meeting the programme objectives. We also found difficulties in convincing the Troika against certain measures we considered as not so helpful in tackling specific economic issues as Troika was assuming.
The Greek and Portuguese finance ministers stressed the negative impact of the aid plans. Greece said: “This remarkable adjustment has come at an extremely high socioeconomic cost” and Portugal talked of the huge social impact. Greece added: “Also, with the benefit of hindsight, the eurozone didn't diagnose timely the causes of the crisis in Greece and across the European South, particularly the widening deficits in the current account balances”. (EL/transl.fl)