Friday

25th Sep 2020

Greece: The troika strikes back

  • Anonymous officials will have powers to stop Greek legislation (Photo: europarl.europa.eu)

Monday’s (13 July) agreement between Greek prime minister Alexis Tsipras and euro leaders would allow the troika of international creditors to block any new legislation linked to the bailout.

The Greek government will first have “to consult and agree” with anonymous officials from “the institutions on all draft legislation in relevant areas” before it goes to public consultation or to parliament.

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The institutions are International Monetary Fund (IMF), the European Commission, and the European Central Bank (ECB).

An EU official familiar with IMF procedure and speaking on condition of anonymity, told this website that such measures are “not particularly new.”

But the contact noted the task ahead for Greece and the political demands on the Tsipras government “is certainly in the outer range” of what the IMF has seen in the past.

“In some sense you are asking a government to do things in five days that they haven’t done in five years, let alone the five months of this government. That is a very high political bar to set”.

Greek MPs will this week have to pass a raft of laws to streamline VAT, broaden the tax base, and make pension reforms, among other pledges, before obtaining any third bailout money.

IMF agreements generally include clauses that require governments not to pass any new legislation or initiatives deemed “inconsistent with the agreement”.

Greece is in arrears to the IMF already, by €1.6 billion, due last month - the largest missed payment in IMF’s history.

But the situation also means IMF’s role will be more limited because Greece is in arrears to it.

The contact noted that a lot of “short term commitments” required by Greece wouldn’t need new legislation because the technical details on such reforms have already been scripted.

“Most of this type of work has already been done and the legislation has sort of been languishing”, said the source, pointing out as an example the transposition of the EU banking resolution directive.

The European Commission, for its part, deferred questions on its role to the ongoing discussion of Eurogroup of finance ministers and subsequent press statements.

The European Central Bank has yet to respond.

But Eurogroup president Jeroen Dijsselbloem told reporters in Brussels earlier in the day that the new supervision "is not about taking over a country”.

The lack of democratic oversight and transparency over the three lenders and their direct involvement in the Greek crisis has seen sharp criticism.

So-called troika teams of creditor officials dispatched to Greece even had to be accompanied by security details and kept meeting locations secret to avoid confrontations with anti-austerity protestors.

Last year, the European Parliament itself called for the dismantling of the troika and for it to be replaced with something accountable to the assembly.

Five years of troika oversight have so far seen the Greek economy suffer, with youth unemployment hovering consistently around 50 percent. Its GPD-to-debt ratio is now around 175 percent, higher than when austerity reforms were first initiated.

For his part, John Weeks, an economist and professor at the University of London, described the troika’s oversight measure as part of a larger erosion of Greek democracy.

“I’ve worked quite a bit in Africa, in Latin America, also in Asia, and I’ve seen the operations of the IMF and the World Bank and their conditionalities and I’ve never seen anything this extreme”, he told EUobserver.

He said the Greek authority, under the terms agreed at the euro summit, has been transformed into “a client government to implement policies of the troika.”

EU countries stuck on rule of law-budget link

Divisions among EU governments remain between those who want to suspend EU funds if rule of law is not respected, and those who want to narrow down conditionality.

EU forecasts deeper recession, amid recovery funds row

The economies of France, Italy and Spain will contract more then 10-percent this year, according to the latest forecast by the EU executive, as it urges member state governments to strike a deal on the budget and recovery package.

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