Wednesday

1st Feb 2023

EU commissioner defends work of bailout 'troika'

In a two-hour long grilling by MEPs on Monday (13 January) in Strasbourg, EU economic affairs commissioner Olli Rehn defended the work of the troika of international lenders: the European Commission, the European Central Bank and the International Monetary Fund.

He said troika officials had to make decisions in "dramatic circumstances" and under "terrible time pressure" back in 2010, when Greece was about to default on its debt and Ireland and Portugal were on their way to asking for a bailout.

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Several MEPs asked Rehn why there is so little transparency on the troika’s work.

Their questions come after euro-deputies who visited Cyprus and Portugal last week reported that the lenders bullied national governemnts into making cutbacks.

But Rehn said that “[bailout] conditionalities are not dictated by anyone, but agreed with the beneficiary country, which is accountable to its national parliament."

He indirectly acknowledged that some eurozone countries - notably Germany - dictated the way the eurozone rescue was designed, however.

He said the European Commission from the beginning favoured an EU "solidarity mechanism" for troubled euro-countries, but EU member states rejected it and opted for bilateral loans to Greece instead.

Rehn recalled he had been barely sworn in to his post, in February 2010, when the first eurogroup conference call was held to deal with the ever-growing budget deficit in Greece.

The deficit was initially projected to reach three percent of GDP in 2009, but climbed to 16 percent.

Rehn also blamed EU member states for rejecting a proposal by the EU commission in 2005 to give the EU statistics office, Eurostat, real auditing powers.

He indicated that the move would have helped to prevent Greece from giving false figures on its deficit - a major factor behind its near-collapse.

He said the troika repeatedly got its Greece economic forecasts wrong because of "political instability" and lack of reliable data.

Rehn also revealed that he spoke to the Portuguese finance minister about the necessity for reforms already in 2010 because it was clear Portugal was going to be left out of markets and need a bailout - "which then happened in April 2011."

He quoted the new German foreign minister, Frank Walter Steinmeier, who last week during a trip to Athens said that Berlin wants the troika to continue its work under its current format and that he sees no reason for the IMF to leave the structure.

"The new Grand Coalition is unequivocally in favour of the continuation of the troika and the eurogroup shares that view. So this creates a certain institutional context for the European Commission and European Parliament," Rehn said.

Tensions between the three institutions on the creation of a eurozone bailout fund (ESM), which is to be modelled on the IMF, have increased rumours that the Washington-based body will not take part in any future eurozone bailouts.

This story was corrected at 15.30 Brussels time to say that Rehn had spoken to the Portuguese finance minister in 2010 about the necessity of reforms, not to convince him to apply for a bailout.

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