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8th May 2021

EU parliament to probe bailout troikas

  • The European Parliament wants to scrutinise the work of bailout troikas (Photo: europarl.europa.eu)

MEPs dealing with economic affairs are to launch an inquiry into the "non-transparent" work of EU Commission, European Central Bank and International Monetary Fund officials overseeing spending cuts in bailout countries.

After more than three years since the first 'troikas' were sent to Greece and Ireland to "advise" the governments and oversee implementation of promised budget cuts, the European Parliament is seeking to shed some light on the work of these non-elected officials.

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The coordinators of the main groups in the European Parliament's economics committee on Monday (28 October) agreed to launch an inquiry into the work of the troika in Greece, Portugal, Ireland and Cyprus.

"The troikas of ECB, EU commission and IMF are playing a key role in the eurocrisis. Their work continues to be non-transparent to a large extent," said German Green MEP Sven Giegold, the main force behind the initiative.

He explained that the inquiry would consist of hearings of troika officials as well as independent economic studies challenging the assumptions of the troika - assumptions that were proved to be wrong in all bailed-out countries.

Unemployment turned out to be higher, the economy shrunk more dramatically and public debt rose more than predicted by the troika in the four countries.

"That is why many European citizens are expecting a comprehensive probe into why these dramatic results came about. We need to look carefully at potential breaches of law or abuses," Giegold added.

The political groups are still negotiating the exact scope of the inquiry, which needs the overall approval of group leaders and committee chairs early next month. According to parliament sources, the centre-right EPP group wants to water down the probe, simply listing what the troikas had recommended throughout the years.

The query will be led by Austrian EPP MEP Othmar Karas and his Social-Democratic colleague from France Liem Hoang Ngoc, while Belgian MEP Philippe Lamberts from the Greens and his Dutch colleague Derk Jan-Eppink from the Conservatives will be "shadow rapporteurs."

One area that may come under scrutiny is the work of private consultancies involved with the troika.

The role of consultancies

The most recent bailed-out country, Cyprus, is currently in turmoil after leaked documents showed that the central bank governor approved a "success fee" of 0.10 percent for the New York-based private consultancy Alvarez and Marsal out of the entire recapitalisation sum for the Cypriot banking sector.

The consultancy is advising the central bank on restructuring the Bank of Cyprus.

The fee, almost €5 million, would have included private deposits above €100,000 from the defunct Laiki bank and the Bank of Cyprus. These deposits were seized as part of the "bail-in" required by the troika in return for the €10 billion worth of loans from the EU and IMF.

Members of the central bank's board said they were unaware of the fee, agreed by the governor, Panicos Demetriades.

For his part, Demetriades claimed he was forced into agreeing to it. He said the consultancy threatened to quit one day before Cypriot banks re-opened after a week of bailout negotiations.

The Cypriot authorities have launched criminal proceedings into the matter.

The US consultancy meanwhile has said it is up to the Cypriot central bank to decide if and how much to pay as a "success fee."

"Alvarez and Marsal has also informed the Central Bank of Cyprus that, in their opinion, the events that have arisen during the past few days concerning the recapitalisation fee are unfortunate," the firm, who is also involved in the Spanish bank restructuring, said in a press release.

Opinion

How about a social troika?

Picture the scene: Troika members go to a member state and are greeted with enthusiasm.

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