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12th Aug 2022

End-of-troika debate amplifies ahead of Greek elections

  • The European Parliament last year asked for an end to the troika (Photo: europarl.europa.eu)

A legal opinion by the EU top court and comments by the EU economics commissioner about the end of the bailout troika have come just days before elections in Greece, where troika-imposed austerity is a central issue.

The troika of international lenders - European Commission, European Central Bank and International Monetary Fund - is mostly known for its teams of "inspectors" going every three months to Ireland, Greece, Portugal and Cyprus to oversee the reforms and sign off on the next bailout tranche.

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Anti-austerity protests turned violent several times in Greece, with troika officials often using security guards and keeping their whereabouts secret.

The European Parliament last year held a special inquiry into the troika concluding that it lacked democratic accountability and that it should eventually be replaced with a European structure.

EU economics commissioner Pierre Moscovici on Monday (19 January), speaking at a Brussels-based think tank, picked up on the idea.

He said the “troika should be replaced with a more democratically legitimate and more accountable structure based around European institutions with enhanced parliamentary control”.

Moscovici added that the troika “was useful and necessary” at the height of the crisis, “but now I think we need another step.”

His comments come just a week after a legal opinion by the general advocate of the European Court of Justice said that the European Central Bank should not oversee reforms of countries it helps via Outright Monetary Transactions, a bond-buying scheme coupled with structural reforms modelled on what the troika has done in bailed-out countries.

"The ECB must, if the programme is to retain its character of a monetary policy measure, refrain from any direct involvement in the financial assistance programme that applies to the state concerned," the legal opinion reads.

A final verdict is due later this year.

Finnish Liberal MEP Olli Rehn, a former EU economics commissioner, told the Financial Times last week that the ECJ legal opinion "would probably mean the beginning of the end of the troika in its current form, which would in turn push the eurozone to yet another important institutional reform."

A spokesman for the EU commission on Tuesday said there is no draft legislation foreseen at the moment and that the EU executive will wait for the final ECJ verdict.

But the spokesman noted what EU commission chief Jean-Claude Juncker said last year on wanting the troika to "evolve" and be made more accountable.

EUobserver understands that the commission is in talks with some member states on a successor for the troika, but this is unlikely to happen before 2016, when the last bailout programme - Cyprus - comes to an end.

German finance minister Wolfgang Schaeuble also said Tuesday that he does not foresee a quick end to the troika format.

He suggested that if EU commission chief Jean-Claude Juncker thinks differently, then he should seek changes to the EU treaty. "The German government has been tirelessly asking for such changes," Schaeuble said.

Treaty change is code for a long process - as all governments and the EU parliament have to agree on it.

All about Greece?

With Ireland and Portugal having ended their bailouts under troika supervision, some say the timing of the end-of-troika discussion is closely linked to Greece, which is holding elections on Sunday.

"This is closely related to the question of who will win in the elections," says Dimitrios Papadimoulis, an MEP from the far-left Syriza party tipped to win the elections on Sunday.

"The victory of Syriza will bring closer the end of the troika," Papadimoulis argues, because European partners have already started signalling they will respect whatever the outcome of the election is.

Core to Syriza's demands is erasing some of Greece's debt, which has reached 177 percent of the country's gross domestic product - almost three times what is acceptable under EU rules (60%).

Fiscal hawks, notably the Finnish Prime Minister, the head of the IMF and German officials have warned that Greece must deliver on its commitments.

But a middle ground could be found in delaying repayment deadlines even further than 2050 and further lowering the interests on the loans.

Talk of a Greek eurozone exit in case Syriza comes to power has ebbed, as well.

"With Syriza in power there is no danger for Grexit. We are anti-austerity, not anti-euro. And we think a compromise on the debt problem is possible, also because it is a larger European problem, a problem of the southern periphery," Papadimoulis told this website.

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