Tuesday

23rd Apr 2019

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.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

  • 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.

Feature

Romania enlists priests to promote euro switchover plan

Romania is due to join the single currency in 2024 - despite currently only meeting one of the four criteria. Now the government in Bucharest is enlisting an unlikely ally to promote the euro to the public: the clergy.

Trump and Kurz: not best friends, after all

The visit of Austrian chancellor Sebastian Kurz to the White House on Wednesday showed that the current rift in transatlantic relations is deepening by the day.

Stakeholders' Highlights

  1. Counter BalanceSign the petition to help reform the EU’s Bank
  2. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  3. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  4. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  5. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  6. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  7. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  8. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  9. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  10. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  11. Nordic Council of MinistersNordic commitment to driving global gender equality
  12. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan

Latest News

  1. Romania drafts EU code on NGO migrant rescues
  2. Bulgaria, Hungary, and Malta shamed on press unfreedom
  3. EU drafts $20bn US sanctions list in aviation dispute
  4. Brunei defends stoning to death of gay men in EU letter
  5. US Democrats side with Ireland on Brexit
  6. Wifi or 5G to connect EU cars? MEPs weigh in
  7. How Brexit may harm the new EU parliament
  8. EU parliament backs whistleblower law

Stakeholders' Highlights

  1. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  2. Nordic Council of MinistersNordic talks on parental leave at the UN
  3. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  4. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  5. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID
  6. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership
  7. Intercultural Dialogue PlatformRoundtable: Muslim Heresy and the Politics of Human Rights, Dr. Matthew J. Nelson
  8. Platform for Peace and JusticeTurkey suffering from the lack of the rule of law
  9. UNESDASoft Drinks Europe welcomes Tim Brett as its new president
  10. Nordic Council of MinistersNordic ministers take the lead in combatting climate change
  11. Counter BalanceEuropean Parliament takes incoherent steps on climate in future EU investments
  12. International Partnership For Human RightsKyrgyz authorities have to immediately release human rights defender Azimjon Askarov

Join EUobserver

Support quality EU news

Join us