The Euro crisis has been at the center of European Union politics during the last four years. It was the most severe crisis during the whole process of European integration, initiated after the end of the Second World War. A substantial part of the EU’s efforts since then has been devoted to so-called ‘crisis management’. European institutions and member states have been working hard to find the appropriate answers to deal with the Euro crisis.
Financial assistance to Eurozone countries with liquidity problems was one of the most visible actions adopted as part of this crisis management. The negotiation and implementation of financial assistance was assigned to a set of institutions, the so-called Troika.
The Troika represents a working-group composed of the European Commission, the European Central Bank and the International Monetary Fund, which is in charge of negotiating financial assistance programs with Eurozone countries that have liquidity problems. It also has the role of carrying out periodical assessments of the level of the implementation of the program.
Financial assistance in itself, however, was provided by special vehicles created by Eurozone countries over time and also by the International Monetary Fund. Lending conditions were to be defined by these financial providers.
A question to be raised is the role assigned to European Union institutions within the framework of the financial assistance programs, and, in particular, that of the European Commission.
Indeed, the European Commission did not participate in the negotiations for financial assistance programs, neither in the assessment of the implementation of those programs, with the legal status of a European Union institution.
Instead, the European Commission participated in the so-called Troika negotiations, and the periodical supervising exercises, on behalf of the member states that provided the loans to the Eurozone countries in financial need. Therefore, in this case, the European Commission did not act as an independent institution.
Furthermore, the Troika’s ability to use assessment power became one of the most striking aspects of the whole of financial assistance programs in the Euro area. In particular, the European Commission proved to take an even more inflexible approach than the renowned IMF financial adjustment hardliners within the framework of the working-group in charge of supervising financial assistance to Eurozone countries.
The toughness of the Troika officials was reflected in the language that leading Portuguese government members used to refer to the situation that the country was facing during the period of financial assistance. From the beginning, the Portuguese deputy Prime Minister Portas referred often that his country had turned into a de facto Protectorate, due to the financial assistance constraints.
Besides, Portuguese Prime Minister Coelho remarked that the country was facing a situation whereby it had lost sovereignty, in the sense that national authorities lacked the ability to decide by themselves most of the fundamental decisions with fiscal implications.
Despite the fact that the concrete measures taken in each Eurozone country within the framework of financial assistance programs were only adopted by national authorities, there is an issue that should be raised: can any political responsibility be assigned to the international institutions that were involved in the negotiations with the Troika, in particular the European Commission?
It should be noted that in the case of Portugal the zenith of the financial assistance program was the area of fiscal policy, which was aimed at reducing public debt and the budget deficit. However, and despite the zeal displayed by national authorities in carrying out the Troika’s recommendations, the country is faced with a huge increase in its public debt – about 35 percentage points – over a period of just three years.
Hence, it is clear that the Commission influenced the way fiscal policy was to be conducted during the financial assistance period. If at the end of the assistance program the country is faced with a level of public debt that significantly overcomes the alleged European Union ceiling for debt sustainability, then it seems reasonable to ask whether the Commission should be considered for any sort of liability for the results achieved in this area.
Financial assistance programs paved the way for deep institutional challenges within the European Union. The fact that member states that had provided financial support to countries with liquidity problems decided to outsource the task of negotiating the conditions attached to the bail-out programs to the Commission, together with the supervision of their implementation, enabled this institution to act in areas that go beyond the jurisdiction of the EU and that transcend the boundaries of its own powers.
Beyond the rearrangements of the balance of power caused by the Euro crisis, a central issue comes to light regarding the Commission’s participation in the Troika: its political liability. The experience of being involved in the process of financial assistance allowed the Commission to exercise a degree of political influence over a group of member states at a level that had never been seen before in European integration. Indeed, the Commission was able to determine a wide range of economic and fiscal policies decisions that were taken by member states receiving assistance, whilst at the same time it was able to employ stronger methods of policy enforcement.
As in any democratic polity, greater power involves more responsibility. If the Commission had had a sound influence over economic and fiscal policy measures that were taken by a bailed-out country during its assistance program, and if it had exercised a stricter control over its implementation, then it should also take responsibility for a share of the final outcome.
Then, it would be reasonable that bailed-out countries that diligently implemented the Troika’s shock therapy should see a part of the Troika-added portion of its public debt readjusted in the framework of a European initiative called by the Commission to address this issue.
Antonio Goucha Soares, Lisbon School of Economics and Management (ISEG), University of Lisbon, Lisbon, Portugal (email@example.com)
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SOARES, Antonio Goucha. EU Commission participation in the Troika mission: is there a European Union price to pay?. Rev. bras. polít. int. [online]. 2015, vol.58, n.1 [cited 2015-10-02], pp. 108-126 . Available from: <http://www.scielo.br/scielo.php?script=sci_arttext&pid=S0034-73292015000100108&lng=en&nrm=iso>. ISSN 1983-3121. http://dx.doi.org/10.1590/0034-7329201500106.