Wednesday

6th Jul 2022

MEPs call for dismantling of EU bailout 'troika'

The "troika" of international lenders, which sets the terms of eurozone bailouts with little or no democratic oversight, should be replaced by an EU system which is accountable to the European Parliament, MEPs say.

"All European instruments that are not based on EU law are provisional. EU instruments should be based on the community method, with the European Parliament acting as democratic legitimator and control body," Austrian centre-right deputy Othmar Karas told press in Strasbourg on Wednesday (15 January).

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Karas is drafting a report together with a French Socialist colleague, Liem Hoang-Ngoc, on the work of the troika.

The name refers to anonymous officials from the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) who managed rescue packages for Cyprus, Greece, Ireland and Portugal.

After holding three hearings with troika representatives this week and after visiting Cyprus and Portugal, the two MEPs said the "ad-hoc body" is not viable in the long run.

They disagreed on when the troika should be dismantled, however.

"If the troika is eliminated now in programme countries, there will be chaos and crisis. The IMF alone has too little money to be the sole lender, while the European Stability Mechanism still needs to be communitarised," Karas said.

“We can't cope with crises with no instrument whatsoever," he added.

He put forward two alternatives - transforming the eurozone bailout fund (ESM) into a European Monetary Fund under EU law, or tasking the European Commission and the ESM with creating a new bailout body which is equally anchored in the EU treaties.

Earlier on Wednesday, ESM chief Klaus Regling also told MEPs that he envisages a future EU-only body that will handle any new crises "over the next decades” without IMF involvement.

He said the IMF initially contributed a third of the money used for the eurozone bailouts, but that that its current contribution is 10 percent.

Disagreements within the troika, with the IMF preferring solutions which the ECB or the EU commission refused to accept, have prompted rumours the IMF will eventually leave.

But for the Socialist group in the EU parliament, the reform process is moving too slowly.

The Socialist leader, Austrian MEP Hannes Swoboda last week said he would prefer if the troika was shut down this year because it is continuing to push for austerity instead of more growth-friendly measures.

“Dismantling the troika during this [Greek] EU presidency would be a real victory for Greece and for Europe,” he noted.

The Socialists’ Hoang-Ngoc said they want an EU treaty change, involving a convention which includes the EU parliament, in order to enshrine any novel intergovernmental structures in EU law.

"Everywhere we go, we [MEPs] are seen as the only ones who are on an equal footing with the ECB and the commission. There is tremendous hope put in us," he noted.

Asked what would have been different if the EU parliament had been involved in bailouts from the start, the French MEP replied "perhaps nothing, because the current majority would maybe have voted for austerity [anyway].”

"But there would have been democratic legitimacy," he added.

The EU parliament’s troika inquiry will visit Ireland this week and Greece at the end of the month.

A vote on its final report is scheduled for February in the economic affairs committee and for March at plenary level.

Greece: The troika strikes back

Officials from creditor institutions - the so-called troika - are to resume Greek supervision, in what critics say is an erosion of democracy.

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