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22nd Jan 2022

MEPs redouble attack on bailout 'troikas'

  • MEPs cannot do away with the troika, but ask for it to be reformed (Photo: Luc Mercelis)

MEPs investigating the troika of international lenders in bailout countries have said it was marred by conflicts of interest and lacked democratic accountability.

The economic affairs committee on Monday (24 February) adopted the non-binding report, which is to be voted on by the entire European Parliament in April.

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Set up on an "ad-hoc basis" as the eurozone was battling the sovereign debt crisis - the troika (containing representatives from the EU commission, European Central Bank and the International Monetary Fund, or IMF) - is on shaky legal grounds and should be replaced with a European version of the Washington-based IMF anchored in EU law, MEPs say.

The report "acknowledges that this might lead to the necessity of a treaty change," a process that takes several years to negotiate and ratify in all EU countries.

Eurozone finance ministers in the Eurogroup also bear "political responsibility" for the accompanying austerity measures that had to be implemented in Portugal, Greece, Cyprus, and Ireland in return for the EU-IMF loans, MEPs said.

They also question the dual role of the EU commission as guardian of the EU treaties but also acting on behalf of member states within the troika.

"There is a potential conflict of interest ... especially in policy areas such as competition and state aid policy, social cohesion, and with regard to member states wage and social policy on which the commission has no competence," the report notes.

The European Central Bank also has conflicting interests as "technical advisor" within the troika and creditor of the bailed-out countries, MEPs said.

Another issue is the "generally weak democratic accountability" of the troika in the bailed-out countries' parliaments.

After trips to the four countries, MEPs found that "when consulted, national parliaments were faced with the choice between eventually defaulting on their debt or accepting memoranda of understanding negotiated between the troika and national authorities."

The contracting of consultancy firms without public tender and for "very high fees" to accompany the work of the troika, as well as potential conflicts of interest held by these companies in the respective countries should be object of a "transparent assessment," the report says.

Back in December, EUobserver reported on the multi-million consultancy business accompanying the troika, often beyond scrutiny.

The report lists a number of recommendations, both in the short and long term, aiming at clarifying the roles and the tasks of each participant of the troika.

The Eurogroup, the Council of Ministers and the European Council of EU leaders are called to assume full responsibility for the troika's operations.

The EU commission is asked to provide a comprehensive assessment of its involvement in the troika programmes, including on fundamental rights. According to a German legal expert who spoke to EUobserver last month, the austerity programmes approved by the troika are in breach of the EU Charter of Fundamental rights.

"Every member state has got clear rules on how to deal for instance with ailing municipalities, which face insolvency. The EU too, needs clear rules on how to deal with states in crisis. The troika was a necessary interim solution. But in the long run we need rules on the basis of EU law," Austrian centre-right MEP Othmar Karas said after the vote.

Green Belgian MEP Philippe Lamberts said the report is a "clear and detailed rebuke" to the troika and has uncovered "unacceptable complacency, with assistance programmes based on overoptimistic and half-baked forecasts."

On conflicts of interest, Lamberts noted that they "undermined the democratic accountability of the policies" and weakened the balance of powers between EU institutions.

"We hope a strong majority of MEPs will support the crucial findings of this report, when it is voted by the parliament as a whole, and that its recommendations will be swiftly acted on," he said.

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