Tuesday

4th Oct 2022

EU parliament to probe bailout troikas

  • The European Parliament wants to scrutinise the work of bailout troikas (Photo: europarl.europa.eu)

MEPs dealing with economic affairs are to launch an inquiry into the "non-transparent" work of EU Commission, European Central Bank and International Monetary Fund officials overseeing spending cuts in bailout countries.

After more than three years since the first 'troikas' were sent to Greece and Ireland to "advise" the governments and oversee implementation of promised budget cuts, the European Parliament is seeking to shed some light on the work of these non-elected officials.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The coordinators of the main groups in the European Parliament's economics committee on Monday (28 October) agreed to launch an inquiry into the work of the troika in Greece, Portugal, Ireland and Cyprus.

"The troikas of ECB, EU commission and IMF are playing a key role in the eurocrisis. Their work continues to be non-transparent to a large extent," said German Green MEP Sven Giegold, the main force behind the initiative.

He explained that the inquiry would consist of hearings of troika officials as well as independent economic studies challenging the assumptions of the troika - assumptions that were proved to be wrong in all bailed-out countries.

Unemployment turned out to be higher, the economy shrunk more dramatically and public debt rose more than predicted by the troika in the four countries.

"That is why many European citizens are expecting a comprehensive probe into why these dramatic results came about. We need to look carefully at potential breaches of law or abuses," Giegold added.

The political groups are still negotiating the exact scope of the inquiry, which needs the overall approval of group leaders and committee chairs early next month. According to parliament sources, the centre-right EPP group wants to water down the probe, simply listing what the troikas had recommended throughout the years.

The query will be led by Austrian EPP MEP Othmar Karas and his Social-Democratic colleague from France Liem Hoang Ngoc, while Belgian MEP Philippe Lamberts from the Greens and his Dutch colleague Derk Jan-Eppink from the Conservatives will be "shadow rapporteurs."

One area that may come under scrutiny is the work of private consultancies involved with the troika.

The role of consultancies

The most recent bailed-out country, Cyprus, is currently in turmoil after leaked documents showed that the central bank governor approved a "success fee" of 0.10 percent for the New York-based private consultancy Alvarez and Marsal out of the entire recapitalisation sum for the Cypriot banking sector.

The consultancy is advising the central bank on restructuring the Bank of Cyprus.

The fee, almost €5 million, would have included private deposits above €100,000 from the defunct Laiki bank and the Bank of Cyprus. These deposits were seized as part of the "bail-in" required by the troika in return for the €10 billion worth of loans from the EU and IMF.

Members of the central bank's board said they were unaware of the fee, agreed by the governor, Panicos Demetriades.

For his part, Demetriades claimed he was forced into agreeing to it. He said the consultancy threatened to quit one day before Cypriot banks re-opened after a week of bailout negotiations.

The Cypriot authorities have launched criminal proceedings into the matter.

The US consultancy meanwhile has said it is up to the Cypriot central bank to decide if and how much to pay as a "success fee."

"Alvarez and Marsal has also informed the Central Bank of Cyprus that, in their opinion, the events that have arisen during the past few days concerning the recapitalisation fee are unfortunate," the firm, who is also involved in the Spanish bank restructuring, said in a press release.

Opinion

How about a social troika?

Picture the scene: Troika members go to a member state and are greeted with enthusiasm.

Exclusive

EU officials were warned of risk over issuing financial warning

The European watchdog for systemic economic risk last week warned of "severe" threats to financial stability — but internal notes show top-level officials expressed "strong concerns" over the "timing" of such a warning, fearing publication could further destabilise financial markets.

News in Brief

  1. Czechs warn joint-nationality citizens in Russia on mobilisation
  2. Greece to unveil proposal for capping EU gas prices
  3. Four dead, 29 missing, after dinghy found off Canary Islands
  4. Orbán: German €200bn shield is start of 'cannibalism in EU'
  5. Lithuania expels top Russian diplomat
  6. Poland insists on German WW2 reparations
  7. Russia halts gas supplies to Italy
  8. Bulgaria risks hung parliament after inconclusive vote

Stakeholders' Highlights

  1. The European Association for Storage of EnergyRegister for the Energy Storage Global Conference, held in Brussels on 11-13 Oct.
  2. EFBWW – EFBH – FETBBA lot more needs to be done to better protect construction workers from asbestos
  3. European Committee of the RegionsThe 20th edition of EURegionsWeek is ready to take off. Save your spot in Brussels.
  4. UNESDA - Soft Drinks EuropeCall for EU action – SMEs in the beverage industry call for fairer access to recycled material
  5. Nordic Council of MinistersNordic prime ministers: “We will deepen co-operation on defence”
  6. EFBWW – EFBH – FETBBConstruction workers can check wages and working conditions in 36 countries

Latest News

  1. Last-minute legal changes to Bosnian election law stir controversy
  2. EU wants probe into alleged Nagorno-Karabakh war crimes
  3. EU officials were warned of risk over issuing financial warning
  4. EU debates national energy plans amid calls for more coordination
  5. What Modi and Putin’s ‘unbreakable friendship’ means for the EU
  6. EU leaders have until Friday for refugee resettlement pledges
  7. Cities and regions stand with citizens and SMEs ahead of difficult winter
  8. Editor's weekly digest: A week of leaks

Join EUobserver

Support quality EU news

Join us