European Parliament points conflict of interest within the Troika of IMF, EU, ECB

Posted by in Economy

The European Commission and the European Central Bank had conflicting interests when they acted within the troika of international lenders in bailed out countries, Members of European Parliament say. Othmar Karas and Liem Hoang Ngoc, the two MEPs tasked with looking at the problems surrounding the work of the so-called troika (EC, ECB and International Monetary Fund) in Greece, Portugal, Ireland and Cyprus have submitted their first draft of the report, due to be voted in the European Parliament in March.

According to the draft, “due to its ad hoc nature there was no appropriate legal basis for setting up the troika on the basis of Union primary law.”

“The Troika is a stop-gap. It is based on the collaboration of governments, but not in Union law. In the future, transparency, parliamentarian scrutiny and democratic legitimacy must be guaranteed.”

“The European Commission acted both as an agent of member states and EU institution,” with MEPs warning that “conflicts of interests may exist inside the commission between its role in the troika and its responsibility as a guardian of the treaties, especially in policies such as competition and state aid.”

The ECB also may have been in a conflict of interest when acting both as creditor for bailed-out countries and as “technical advisor” within the troika. With the ECB legal mandate limited to monetary policy, any involvement in budgetary, fiscal and structural policies is “on uncertain legal ground.”

This led to several potential legal and accountability problems.

Another issue is the approval – both by the commission and the ECB – of policy measures which were struck down by national constitutional courts, for instance in Portugal.

They also want the legally binding reform plans connected to bailouts (memorandum of understanding) to be drafted with “appropriate democratic accountability” both at national and EU level, meaning the involvement of parliaments.

The European Parliament also plans to send a delegation of MEPs to Portugal, Greece, Cyprus and Ireland in January and hold hearings with the economics commissioner, Olli Rehn, the former ECB chief, Jean-Claude Trichet, and the head of the eurozone bailout fund, Klaus Regling.

The MEPs sent a questionnaire to the programme countries’ governments, the commission and the ECB.

The ECB would not comment on the draft report. A spokesman for the Frankfurt-based bank told this website all answers will be sent to the European Parliament.

The EU commission said the same, but added that it was EU leaders who gave it this mandate in 2010 with the first Greek bailout and then reconfirmed it in May 2013.  (full article EUobserver)

Below is the press released published by the European Parliament on the draft report and the calendar of MEP’s delegations visits to eurozone bailout countries as well as the hearings of EC and ECB officials.

The draft report from Parliament’s review of crisis bailout work by the “Troika” (International Monetary Fund, European Central Bank and European Commission) was tabled by lead MEPs Othmar Karas (EPP, AT) and Liem Hoang Ngoc (S&D, FR) on Wednesday. The will form the basis of political work set to kick off in January, at hearings with key bailout players and delegations to Cyprus, Greece, Ireland and Portugal.

Rapporteurs Othmar Karas (EPP, AT) and Liem Hoang Ngoc (S&D, FR) said:

“We have thrown our work into the open.  This is the first step.  It is now through the hearings and our visits to the affected countries that we, and our colleague MEPs, will delve deeper to gather evidence to inform any recommendation for change.  We shall also receive answers to a detailed questionnaire that we put to key policy makers. We welcome the European Commission’s willingness to contribute, and invite others, in particular the ECB and Eurogroup, to follow suit in the same spirit of transparency and accountability. ”

The draft text takes stock of the economic situation in the programme countries at the start of the crisis, gives an overview of the Troika’s institutional setup and outlines the economic underpinnings on which it built its goals.

The draft also gives various pointers as to where improvements are most needed. These include reforming decision-making structures to increase coherence, transparency and accountability and considering a revision of the  the fiscal multipliers on which assumptions are based.

The text also points out that improvements are needed at national level too, especially with regard to “ownership” of the reform process, which, if absent, results in less effective implementation and less positive results.

Indicative calendar

·         Questionnaire – Sent on 22 November to decision-makers of the Troika institutions (COM, ECB, IMF), the Eurogroup, the European Council, and the four countries’ authorities. Answers have been received from the Commission and the rest are expected shortly.

·         Delegation to Lisbon – 6 to 7 January

·         Delegation to Athens – 8 to 9 January

·         Delegation to Nicosia – 10 to 11 January

·         Hearing of Commissioner Rehn – 13 January (Strasbourg)

·         Hearing with former ECB President Trichet – 14 January (Strasbourg)

·         Hearing with ESM director Regling – 15 January (Strasbourg)

·         Presentation of draft report in committee – 16 January (Strasbourg)

·         Delegation to Dublin – 16 to 17 January

PS I wonder what the consequences will be :)