Troika helped to avoid the worst, but flawed structure harmed recovery
The EU/ECB/IMF "Troika" helped four EU countries through the crisis and prevented it from getting worse. But its flawed structure and working methods hindered national "ownership" and compromised transparency and accountability, says a resolution on the EP inquiry findings. A second resolution deplores the widespread negative impacts that Troika-inspired reforms had on employment and advocates revising the measures put in place.
Both resolutions were voted on Thursday. The one on the Economic and Monetary Affairs Committee's inquiry into the workings of the Troika, drafted by Othmar Karas (EPP, AT) and Liem Hoang-Ngoc (S&D, FR), was approved by 448 votes to 140, with 27 abstentions. The Employment and Social Affairs Committee's resolution, authored by Alejandro Cercas (S&D, ES) was approved by 408 votes to 135, with 63 abstentions.
The “inquiry resolution” acknowledges that the immediate aim of avoiding disorderly defaults was achieved and that the challenges that the Troika was set up to tackle were "immense". It also deplores the fact that EU institutions were made a scapegoat for the adverse effects of reforms, even though it is finance ministers who should bear political responsibility for them.
A weakly-built system
The inquiry findings paint a damning picture of the Troika's organisation. "The three independent institutions of the Troika had an uneven distribution of responsibility between them, coupled with differing mandates, as well as negotiation and decision-making structures with different levels of accountability, all resulting in a lack of appropriate scrutiny and democratic accountability as a whole", says the text. National parliaments were also too often left out, it adds..
The Troika system is also criticised for taking a "one-size fits all" approach from which it was often reluctant to depart.
EU finance ministers, particularly in the Eurogroup, are blamed for failing to give clear and consistent political pointers to the Commission and for failing to shoulder their share of responsibility in their capacity as final decision-taker.
No proper impact assessment
The conditions imposed in return for the financial assistance have jeopardised the EU's social objectives, notably because little time was allowed to implement the measures and there was no proper assessment of their likely impact on various social groups, says the Employment Committee text.
Unemployment has increased, particularly among the young - leading to their emigration - and many small businesses have failed. Poverty rates have also risen, including among the middle class, it adds.
As a first step, there should be clear, transparent and binding rules of procedure for the interaction of the Troika institutions which regulate the allocation of tasks between them. An improved communication strategy is also an "utmost priority", says the Economic Affairs Committee text.
Future adjustment programmes would need to come with a "plan B" should assumptions prove wrong. The memoranda of understanding underpinning them will need to reflect the social and employment dimensions better. Each country placed under a programme should moreover have a "growth task force". Finally, much more effort must be made to ensure the vital accountability and national ownership, say MEPs.
For the medium term, the inquiry resolution recommends a radical overhaul of the Troika, in which IMF involvement would become "optional", the ECB would be present only as a "silent observer", and the European Commission's role would be taken over by a "European Monetary Fund" (EMF).
Job recovery plan required
The second resolution calls on the Commission and the Council to give the same attention to social imbalances as to macroeconomic ones. Member states and the EU should put in place a job recovery plan once the worst of the financial crisis has passed, taking particular account of the need to create favourable conditions for small firms, for instance by repairing the credit system.
The Commission, the ECB and the Eurogroup (Eurozone finance ministers) should review and revise the measures put in place as soon as possible and the EU should support, with sufficient financial resources, the restoration of social protection standards, MEPs add.