Monday

20th Nov 2017

Troika officials admit errors, as criticism mounts

When Klaus Masuch and Servaas Deroose walked into the European Parliament in Brussels on Tuesday (5 November), they must have been relieved to be facing MEPs rather than angry Greek protesters on the streets of Athens.

As representatives of the so-called troika of international lenders, the two are familiar with the Greek finance ministry where their colleague from the International Monetary Fund (IMF), Poul Thomsen, had to duck a rain of coins being thrown at him in Athens that same day.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

  • Riot police in Athens clamp down on protests against the 'troika diktat' (Photo: Contact)

Deroose, a Flemish economist and deputy-director general in the European Commission, was involved in the design of the first Greek bailout, in 2010, and was the commission's "mission chief" for the Greek programme until spring 2011.

Masuch is a German economist chairing the "EU countries division" at the European Central Bank and was often seen in Athens and Dublin as part of the troika missions to Greece and Ireland.

Having unelected officials determine wage and pension cuts is a massive blow to a country's sovereignty. Protests accompanied the troika missions everywhere they went.

Tuesday was the first time troika officials appeared in front of the European Parliament, whose deputies are keen to extend their scrutiny over the workings of this semi-official body.

Deroose and Masuch were eager point out that theirs is just "technical expertise." The real decision-making power, they said, lies with the Eurogroup - the 18 eurozone finance ministers who decide if and how much money a country gets.

It is also the Eurogroup who has to formally sign off on each bailout tranche, with the troika currently assessing if Greece, Cyprus and Ireland are fit for their next pay-outs.

But it is the troika that provides the ministers with the economic forecasts, scenarios and figures they need to make the decisions.

And in Greece's case, their forecasts were "off-track," as both Masuch and Deroose admitted.

But they blamed the Greek government for having provided them with incorrect figures back in 2010.

"External factors" such as the worsening global economic crisis, political instability in Greece and a "lack of ownership of reforms also increased the social cost," Masuch said.

However, Greece was not an isolated case.

Vested interests

Earlier this year, the IMF itself admitted that so-called multipliers - elements of a formula they used to make economic forecasts during the euro-crisis - had been wrong because they underestimated the impact of austerity on the economy.

The troika officials on Tuesday admitted they had all worked with the same wrong numbers.

"All macroeconomic projections rely on a common set of projections and multipliers. We use the same as the IMF, so we have a similar approach," Deroose said.

Asked if they would do things differently with hindsight, the two officials said the broad strokes of the programmes - also in Greece - were right, but the focus could have been changed in places.

Deroose said there was too little emphasis on competitiveness in the first Greek programme, while "financial stability in the banking sector" should have featured more strongly when it came to restructuring and recapitalising banks.

The troika also overestimated the capacity of the public administration to implement such a large programme.

For Masuch, the "surprising" experience in Greece was to see the extent to which "vested interests" tried to "avoid, delay and water down reforms."

"We suggested getting rid of unjustified privileges, which keep prices high to the detriment of the consumer. But there was not much coming from the government on this front," Masuch said.

The hearing was only a first step.

The heads of the political groups in the European Parliament are set to decide later this week on the scope of a parliamentary inquiry into the troika.

"The troika did more damage than good," European Parliament chief Martin Schulz wrote in an article published by the Greek daily To Vima on Sunday.

"Someone has to take responsibility for the failed attempts and the huge disappointment caused," he wrote, adding that the parliamentary inquiry will seek to understand "why so many mistakes were made and why so many statements considered correct three years ago proved to be absolutely wrong."

EU parliament to probe bailout troikas

MEPs are to launch an inquiry into the "non-transparent" work of EU commission, ECB and IMF officials who oversee spending cuts in bailout countries.

MEPs ponder how to fight tax havens

After the Paradise Papers brought new revelations about tax dodging across the globe, including in the EU, the European Parliament wonders how to step up the fight.

MEPs ponder how to fight tax havens

After the Paradise Papers brought new revelations about tax dodging across the globe, including in the EU, the European Parliament wonders how to step up the fight.

News in Brief

  1. European Banking Authority will move to Paris
  2. EU court threatens daily fine over Polish forest logging
  3. EU medicines agency will move to Milan or Amsterdam
  4. Amsterdam, Copenhagen, Milan in next round of EMA vote
  5. Three countries pull out of medicines agency Brexit race
  6. Schulz calls for new German elections
  7. EU Commission 'confident' on German stability
  8. EU adopts new border check rules

Stakeholders' Highlights

  1. Dialogue PlatformErdogan's Most Vulnerable Victims: Women and Children
  2. UNICEFEuropean Parliament Marks World Children's Day by Launching Dialogue With Children
  3. European Jewish CongressAntisemitism in Europe Today: Is It Still a Threat to Free and Open Society?
  4. Counter BalanceNew Report: Juncker Plan Backs Billions in Fossil Fuels and Carbon-Heavy Infrastructure
  5. Nordic Council of MinistersNordic countries prioritise fossil fuel subsidy reform
  6. Mission of China to the EUNew era for China brings new opportunities to all
  7. ACCASmall and Medium Sized Practices Must 'Offer the Whole Package'
  8. UNICEFAhead of the African Union - EU Summit, Survey Highlights Impact of Conflict on Education
  9. Nordic Council of MinistersNordic Council Calls for Closer Co-Operation on Foreign Policy
  10. Swedish EnterprisesTrilogue Negotiations - Striking the Balance Between Transparency and Efficiency
  11. Access EuropeProspects for US-EU Relations Under the Trump Administration - 28 November 2017
  12. Nordic Council of MinistersSustainable Growth the Nordic Way: Climate Solutions for a Sustainable Future