Euro Crisis

Tinkering with the Troika

No love for the Troika. Source: DPA
No love for the troika.
  • Why it matters

    Why it matters

    The German government is split on whether to reconfigure the troika, which is made up of the European Commission, the International Monetary Fund and the European Central Bank.

  • Facts

    Facts

    • The Christian Democrats want to maintain the status quo, while the Social Democrats and the E.U. Commission are demanding reform.
    • European Commission President Jean-Claude Juncker has suggested the ECB will have to leave the troika.
    • The ECB has put more pressure on governments of the countries in crisis.
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    Audio

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A fight has broken out between the German government and the European Commission over the future of the troika, the group of international lenders — the European Central Bank, the European Commission and International Monetary Fund — which has overseen the implementation of Europe’s bailouts over the past few years.

The spat could potentially raise tensions both inside Chancellor Angela Merkel’s ruling coalition and with other E.U. countries.

German Finance Minister Wolfgang Schäuble, a member of Ms. Merkel’s conservative Christian Democrats (CDU), wants to stick to the status quo at all costs.

“As long as anyone in Europe requires help, this will be attached to conditions,” said Mr. Schäuble. “The troika is the right tool for monitoring it.”

European Commission President Jean-Claude Juncker, on the other hand, sees no future for the troika in its current form.

At the beginning of his term last November, Mr. Juncker already signaled his desire for a reform of the body.

Most recently, Mr. Juncker suggested that the ECB will likely have to leave the group. The German government fears that this could have political consequences, because the three players in the troika do not all  have the same approach. The ECB has put much more pressure on the governments of the bailout countries than the European Commission has.

“Although it doesn’t do their work justice, the troika has in the meantime become a symbol of the loss of democracy in the crisis.”

Carsten Schneider, deputy parliamentary leader, SPD

Portugal and Ireland have already exited their bailout programs but Greece’s program has been extended until the end of February. All three countries had to turn to the international lenders at the height of the euro crisis to avoid bankruptcy. In return for the bailouts, the countries had to submit to close supervision by the troika.

Blamed for the crushing austerity polices implemented during the euro crisis, the so-called troika has now become a dirty word in many European countries. Advisors to Alexis Tspiras, the leftist politician poised to become Greece’s next prime minister in an election on Sunday, have said they will no longer accept the troika as a negotiating partner.

There are also differences of opinion on the troika within Chancellor Merkel’s ruling right-left coalition in Berlin. Her junior partners, the center-left Social Democrats (SPD), support Mr. Juncker’s plans for reform.

“The structure of the troika was formed quickly by the logic of a time of crisis,” Carsten Schneider, the deputy leader of the SPD’s parliamentary group, told Handelsblatt. “Although it doesn’t do their work justice, it has in the meantime become a symbol of the loss of democracy in the crisis, and this is especially true in the countries under its regime.”

He said that Mr. Juncker’s demand for better parliamentary control of the troika is therefore correct. “A euro-zone parliament with representatives from national parliaments would be a considerable improvement for shared understanding of the necessary economic and financial policy decisions, to improve fiscal governances of the Eurogroup and to establish transparency,” he said.

Norbert Barthle, the spokesman for the Christian Democrats’ parliamentary group on budgetary issues, disagrees. “The idea comes from the affected countries, which want to fight back in this way against the troika’s conditions,” Mr. Barthle said.

 

The German finance minister sees things similarly. Wolfgang Schäuble only considers changes to the troika possible if the E.U. Treaty of Lisbon were to be changed. He said he is “eagerly awaiting” Mr. Juncker’s “initiative for a treaty amendment.” The statement is full of biting sarcasm, because Mr. Schäuble knows all too well that the raging euroskepticism makes any change to the E.U. treaties impossible now. Any change to the treaties would require unanimous agreement from all 28 European Union members.

And Mr. Schäuble thinks a withdrawal of the ECB from the troika without a treaty change would be impossible. According to his point of view, that would even be the case if the European Court of Justice were to prohibit the participation of the ECB in the economic governance of the crisis nations.

The advocates-general of the European Court of Justice had pleaded for such a ban. According to their argument, if the ECB, under the scope of the program announced in 2012, were to buy bonds, it must stay out of the economic policies of the crisis countries.

In the meantime, the ECB is about to launch a new bond-buying program, says the German finance ministry, making the statement of the advocates-general on the role of the ECB in the troika irrelevant.

 

Ruth Berschens reported from Brussels, Jan Hildebrand from Davos and Donata Riedel from Berlin. To contact the authors: berschens@handelsblatt.com, hildebrand@handelsblatt.com and riedel@handelsblatt.com

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