Brussels, 13/02/2014 (Agence Europe) - The European Central Bank (ECB) has only an advisory role and is not involved in decision-making on the troika (European Commission, ECB and International Monetary Fund) that provides aid for struggling eurozone nations, explained Benoît Coeuré, a French member of the ECB's Executive Board during a public hearing on Thursday 13 February at the European Parliament's economic and monetary affairs committee.
His comments failed to convince the EP's co-rapporteur on the troika's work, Liem Hoang Ngoc (S&D, France), who stressed the ECB's role in deciding on the structural adjustment measures imposed on Ireland and Cyprus.
On Ireland's request, backed by the IMF but rejected by the ECB, of a bail-in of senior bond-holders to bail out the banks, Coeuré defended the ECB's line, arguing that “a bail-in of bond debt would have triggered the risk of systemic contagion and needed a framework that we didn't have”. The too-big-to-fails in Ireland had to be protected by governments and at the time, 2007, there were no EU rules on bail-ins. “This changed with the BRRD” on the resolution of failed banks, he said, adding that the ECB feels that the shift from bail-outs to bail-ins was a good move and therefore the ECB backed BRRD and would have been prepared to go further.
Commenting on Cyprus and the supply of emergency cash (ELA) to Cypriot bank Laiki, which has been wound up, Coeuré said that ELA had been “decided by the Cypriot central bank” and, given the prospect of financial aid and bank recapitalisation, Laiki was considered to be solvent. He said that, in some cases, the Eurogroup decided against the troika's recommendations, like on the question of private sector writedowns of Greek bonds in 2012, which the ECB opposed. He added that a restructuring of the Greek debt for the future has not yet been discussed.
Asked about Germany's taking the ECB's OMT programme to the European Court of Justice, Coeuré said that the programme's status had not changed and could still be used, although it was highly unlikely that it would be used at the present time.
He said the troika would not exist in its current format eternally, but there was no alternative to it in the short-term. For the future, he called for a body based on the Community method. He did not comment on the IMF's involvement, simply stating that the IMF had made a valuable contribution thus far.
In a debate on Wednesday, MEPs seemed to agree that the EP's report on the troika must not be used on the campaigning trail and the EPP called for it to be neutral in terms of ideology. Olle Schmidt (ALDE, Sweden) called on his colleagues to recognise their own responsibility, based on a report in the year 2000 by Robert Goebbels (S&D, Luxembourg) that recommended that Greece be invited to join the eurozone - pointing out that a good number of the MEPs present at the debate had voted in favour of the Goebbels report in the year 2000. (EL and MB/transl.fl)