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Troika under scrutiny

On 5 November, the Committee on Economic and Monetary Affairs of the European Parliament met to debate “Successes and failures in crisis countries”. On the agenda were the activities of the Troika, which is made up of the International Monetary Fund (IMF), the European Central Bank (ECB) and the Commission. The neoliberal technocratic ideology of the Troika was met with critical questions by MEPs.

Are trade unions and high salaries to blame for the crisis?

The hearing in the Committee was made possible because of the so-called Two-Pack, two Directives, which further strengthen Economic Governance and regulate, among other, the relationship of the so-called programme countries to European institutions. The programme of the hearing started with short lectures by four economists, who had been invited as experts. Afterwards representatives of Commission and ECB presented their point of view and answered questions. Not present were representatives of the IMF, which, even though it plays an important role in the Troika, rejected to be questioned by directly selected MEPs.

Under the heading “competitiveness”, the four Economists Paul Jorion, Fernando Fernandez, Xavier Timbeau and Gilles Saint-Paul presented their contributions on the relation of banking crisis and debt crisis and on the economic developments in the eurozone. In particular the last contributions by Prof. Timbeau and Gilles Saint-Paul made it clear that the European Parliament is not a great venue for employee-friendly economic approaches. Both academics only differed in respect of one question, namely, to what extent the wages in the crisis countries has to be cut.

The lecture of the French economists Saint-Paul showed the extent of his contempt for trade unions and the situation of employees. Not only did he complain that the modest social measures with resources of the European structural funds and the World Bank had a negative impact in Greece because they would undermine “competitiveness”. He also showed how little value democracy has in technocratic neoliberal ideology and in a good many “scientific” rooms. Saint-Paul underpinned his thesis that high salaries and trade unions were to blame for the crisis with a remarkable and characteristic historical example, telling the somewhat amazed MEPs that unemployment had not existed under Franco’s dictatorship in Spain as wages had been low. However, after the end of the dictatorship, wages had risen because of the trade unions and the consequence was that today’s Spain’s unemployment figures had reached over 20 %.

Commission and ECB under fire

The last part of the Committee was entirely devoted to the representatives of the Troika. The Commission was represented by Servaas Deroose, Deputy Director-General for Economic and Financial Affairs, the ECB by Klaus Masuch, the ECB's head of EU countries division.

The Austrian MEP Otmar Karas (APP) started the hearing by asking some of the most important questions: What kind of role do the various institutions play? Who does the Troika report to? How are the measures agreed developed? What is the basis for decisions taken by the Troika? What is the origin of the discrepancy between public and the Troika’s perception? Which suggestions for improvement did the Troika have?

Other MEPs, in particular from the crisis countries, asked critical questions on the legitimacy of the Troika, but also in respect of its economic policy orientation.

The MEP of the European Left Marissa Matias from Portugal once again reminded of the social dimension of the crisis and the measures adopted by the Troika: austerity had been a big mistake, which had led to record unemployment, a reason why thousands of people would leave Portugal each month.

Many MEPs, for example the French Social Democrat Liem Hoang Ngoc mentioned the serious mistakes in economic forecasts.

Both representatives of the Troika showered themselves with self-praise. They argued on several occasions that there had been no alternative to the adjustment programmes, which meant that in principle they evaded any substantial debate. After a period of austerity measures and structural reforms, there was light at the end of the tunnel at last; the economy was growing. At the same time, however, they tried to shift any responsibility by emphasizing time and again that in the end it was not them who were responsible for their activities, but the Eurogroup (hence, the finance ministers of the Eurozone), who in their capacity as financiers would have the last word. The often wrong forecasts, in particular at the beginning of the Greek crisis were explained with the unpredictability of the situation. Even though the representatives of Commission and ECB patiently answered the questions of the MEPs and faced their criticism, there were not in the slightest prepared to deviate from their political line. Answering the question, what they would do differently today, the representative of the Commission replied that one should have focussed on cutting wages in the private sector at an earlier stage.

The hearing in Parliament has ensured that the Troika has now to justify its policy in public. Even though one cannot expect that this will change their policy, further hearings and criticism will follow. One can only hope that it at least results in a democratic debate on the right economic policy for Europe.
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