What to do with Troika?

Read few comments.

Questions:

1. Commissioner Viviane Reding said that European citizens do not trust the Troika. And they are right. So from your point of view, how effective or ineffective Troika has been?

2. Is Troika somehow a political burden for the EU politicians? 

Answers:

Jean-Marc TrouilleJean Monnet Chair in European Economic Integration, School of Management, Bradford University

What we owe to teh IMF… And to Viviane Reding.

Recent issues surrounding the trilateral Troika partnership have highlighted once again the inherent weaknesses of Europe’s monetary construction and a lack of vision and unity among European political leaders to solve them. Viviane Reding rightly points out that Europe has the resources and structures to resolve its problems on its own. It has a Commission, which she regards as the economic government of Europe, and it has a Central Bank. So why was it necessary to include the IMF? This was due to the insistence of Germany and Finland that the IMF should be involved in the Eurozone’s crisis management. But troikas rarely last. In his days, Bismarck wisely said that in any triangular relationship he wanted to be ‘one of the two’. His strategic wisdom would seem to fit with the current situation: with decisions mainly taken in Berlin, Frankfurt and Brussels, the IMF has suffered from the troika experience in terms of credibility. Besides, the rising influence of emerging economies within the IMF makes it difficult to justify why a country like Ireland, whose citizens’ standard of living is comparatively high within Europe (fourth rank, higher than Germany’s), or even Greece, whose citizens, despite tremendous difficulties, live better than Brazilians or Indians, should receive financial support from these countries. Moreover, the IMF is unpopular in bailed-out peripheral Eurozone countries, but after all it had to make up for the Eurozone’s own contradictions: the problems dealt with affect the Eurozone as a whole, but it was only able to impose adjustments to 4 of its 17 member countries.

As regards Reding’s controversial statement, she was accused by some of going beyond what is, strictly speaking, her brief as Commissioner for Justice, Fundamental Rights and Citizenship. I do not agree with these criticisms. First, she is one of the Vice-Presidents in the current Commission. This in itself lends her the authority to speak loudly about key European issues. Second, and more importantly, issues raised by this debate are about democratic decision-making and Europe’s democratic deficit. That these critics do not grasp that these crucial issues are at the core of the Commissioner’s prerogatives is strange to me. Democratic decision-making, or the lack of it, has become a sword of Damocles for Europe. None of the Troika’s three are directly elected. Reding considers rightly that “fundamental decisions, for example on whether to fire tens of thousands of public employees, should not be taken behind closed doors. They should be debated in the directly elected European Parliament.” Yes, yes and yes. And the Commission should also be answerable to European citizens and become the economic government of Europe. Only more vision and more democracy will counter the rise of populism.

Andreas BielerProfessor of Political Economy, School of Politics and International Relations, University of Nottingham

As I see it, the Troika has been very effective at implementing or I should better say imposing the neo-liberal austerity policies in exchange for bailout packages. (When I say ‘effective’ here then I don’t mean this in a normatively positive way. Personally, I am opposed to austerity.) European citizens, however, have become increasingly suspicious and critical of the Troika because there is increasing resistance against further cuts and austerity. The Troika, therefore, can be understood as a political burden in that it undermines the EU’s and the EU institutions’ legitimacy in the eyes of many European citizens.

Anna VisviziAssociate professor, DEREE – The American College of Greece.

1. It is very difficult to generalize about the Troika at the EU-level, as there have been different sets of Troika operating across the eurozone. In the very specific case of Greece, indeed, the Troika has proved to be completely ineffective for a number of reasons.

• In 2009, on the eve of Troika’s arrival to Greece, unemployment was 9.5%. Today, it is 27%.

• GDP Growth in 2009 was -3.1%, in 2011 it was -7.1% and in 2012 -6.4%

• Overall, Greece’s GDP shrunk by at least 20% since the arrival of the Troika.

• The debt/GDP ratio in 2009 was 129.7%, today in 2013 it is 176.2%.

• Net household savings in 2009 was -2.0 (% of GDP) in 2011, as a result of policies dictated by the Troika, it was -8.3.

Note, all data from the Commission’s Autumn Economic Forecast, available at: http://ec.europa.eu/ economy_finance/eu/forecasts/2013_autumn_forecast_en.htm 

2. The Troika is a burden to national authorities. Due to its total ignorance of country-specific circumstances and insistence on ‘fixing the books’ and numbers rather than on implementing structural reforms that would liberalize the economy and lead to recovery, the Troika in fact blocks the reform process. This suggests that the individuals comprising the Troika are incompetent and arrogant.

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