Activists hold a E.U. flag with a jolly roger painted on to protest against the austerity measures across Europe October, 2013 in Rome. AFP/Getty Images
The role the troika of international lenders has played during the euro crisis is still hard to quantify, since some eurozone bailouts it has managed are still in place. Yet the backlash against the ad-hoc trio of lenders formed by the European Commission, European Central Bank and International Monetary Fund is far from over. On Thursday the European Parliament approved two reports: one that looks into the methods and results of the troika and one focused on the effects on employment (along with other social metrics) of the role and operations of the troika with regard to euro area bailout packages delivered in Greece, Ireland, Portugal and Cyprus. The four countries combined have been committed a total 396 billion euros ($541 billion) in return for reforms — i.e. austerity measures — and a clear debt-reduction plan.
MEP Othmar Karas (EPP, Austria) and Liêm Hoang-Ngoc (S&D, France), authors of the first report, call for the establishment of a European Monetary Fund “which should combine the money of the European Stability Mechanism with the expertise that the Commission has gained over the last years.” The troika was constructed with no clear legal basis and with no scrutiny from the European Parliament; a common monetary fund would be the only way financial rescue mechanisms in the region could respect the E.U.’s laws and basic principles. The report “calls on the Eurogroup, the Council and the European Council to assume full responsibility for the operations of the troika.” It asks for the head of the Eurogroup (also created with no legal basis) to be called before the European Parliament and E.U. national parliaments if a country is to be granted financial assistance — hence involving them in the design, approval and monitoring of the program. Ultimately they call for a “transparent evaluation of the awarding of contracts to external consultants, the lack of public tenders, the very high fees paid and the potential conflicts of interests.” It’s been reported in the past that a handful of big consultancy and audit firms were hired on secretive multimillion-dollar contracts in connection with the troika, often without public tenders and regardless of their potential conflicts of interests. (Read EU Observer’s investigation here).
The second report focused on the social effects of austerity-led policies. “It would have been foolish to close this chapter by just talking about the impact the program’s have had on markets, on macroeconomic imbalances and public debt, forgetting the impact they have had on the citizens and on the welfare state,” says the author of the report Alejandro Cercas (S&D, Spain). He argues that the austerity policies and the structural reforms imposed in the troika countries have caused a tsunami of massive unemployment (it has tripled in some countries) especially among young people, as well as he closure of hundreds of thousands of companies, mainly SMEs, and a sharp rise in poverty and social exclusion. (Read more: Austerity could take 25M more Europeans into poverty by 2025).
The establishment of an employment and social recovery plan is something many MEP dream of. They might want to start by pushing for a new, more socially aware economic dogma for the troika. Look for opposition on that front from Angela Merkel. A lesser victory would be to see the three lenders establish transparent and binding rules of procedure for future bailouts.
