Limited investigations lead to very limited conclusions….
Today the European Parliament votes on the “Report on the enquiry on the role and operations of the Troika (ECB, Commission and IMF)”. In Europe in the last three years financial institutions were bailed out in an unprecedented manner at the expense of ordinary people. The report gives no satisfactory answer as to why this happened and how it can be stopped from happening again. Τhe decision to limit the mandate of such an investigation only to Greece, Ireland, Portugal and Cyprus is just one of the investigation’s drawbacks. It appears that the Parliament decided to overlook that Spain also signed a Memorandum of Understanding with the Troika.
While ordinary people suffered through lost jobs, cuts to wages and pensions and sometimes even died due to cuts in the health system, financial institutions were bailed out usually without even changing their management. The report completely failed to investigate why there were always a lot of conditions imposed upon governments for bail-outs, while financial institutions were bailed-out, and governments were refused the right to have any say in the institutions they are paying for.
For Greece the report notes that there was a debate inside the Troika in which the IMF demanded an early debt restructuring, which was refused by the EU. The only reason given for this in the report is that the ECB was concerned about the fragility of European financial institutions and of contagion if they were to fail. However the report completely failed to investigate to what extent this argument is valid, given the size of the Greek debt problem compared to the GNP of the Eurozone.
But even if the argumentation of the ECB was true, then there is the question, why do only the people of a few states have to pay for the bail-out of the European banking system and not all states? Indeed, the bail-out happened not only in favor of financial institutions in the crisis states, but also to a big extent in favor of the financial sector in core countries such as Germany and France. While in some countries the people have to suffer and make huge sacfrifices, other countries like Germany can even benefit from the crisis by making profits from loans, benefitting from extremely low interest rates for their bonds and taking advantage of a huge capital inflow form the crisis states.
The report notes that there was massive pressure on some governments to bail-out their banks, especially from the ECB. However it is insufficient that the report ‘Stresses that the European institutions need to respect Union law, including the Charter of Fundamental Rights of the European Union, under all circumstances’. It should be expected from such an investigation to provide a list detailing who has, when and how violated laws and who should bear personal and institutional consequences from that.
Concerning the proposals of the Parliament, especially the creation of a European Monetary Fund (EMF), a Europe based on solidarity needs other changes than an EMF. Even with such a new institution put in place the European Parliament will probably not become automatically a sufficiently progressive institution ready for the next time financial institutions are to be rescued, as it has proven with this limited investigation on the Troika. We expect from this Parliament more comprehensive investigations on these matters in the future. This, together with other necessary changes in the direction towards a Europe of more solidarity (which also would include stop bailing out banks at any price and going for debt audits) is needed to stop the current redistribution of wealth from the poor to the rich.
Stephan Lindner (Attac Germany; Germany; German and English):
firstname.lastname@example.org, +49 176 243 427 89
Thanos Contargyris (Attac Hellas; Greece; Greek, English and French):
email@example.com, +30 69 49 72 73 90
Leonie Hogervorst (Corporate Europe Observatory; Belgium/the Netherlands, Dutch and English)
firstname.lastname@example.org, +32 2 893 0930
Chiara Filoni (CADTM; Belgium/Italy; Italian, French and English)
email@example.com, +32 486 11 98 32
Ajda Pistotnik (Humanitas; Slovenia; Slovenian and English)
firstname.lastname@example.org, +386 1 43 00 343
Sargon Nissan (The Bretton Woods Project ;UK; English)
email@example.com, +44 20 3122 0644
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Here are some of the highlights from the report we think worth mentioning. You can find the complete report in the version agreed on in the Committee on Economic and Monetary Affairs here.
- Point 17 about the Greek program:
Notes that the first agreement of May 2010 could not contain provisions for a restructuring of the Greek debt, despite it being first proposed by the IMF, which, in line with its usual practice, would have preferred an early debt restructuring; recalls the ECB’s reluctance to consider any form of debt restructuring in 2010 and 2011 on the grounds that it would have led to the crisis having a contagion effect on other Member States, as well as its refusal to participate in the restructuring agreed in February 2012;
- Point 19 about Ireland:
Recalls the bilateral pressure reportedly exerted by the ECB on the Irish authorities prior to the initial agreement between the latter and the EU and IMF being adopted on 7 December 2010 and 16 December 2010, respectively in the relevant MoUs containing the policy conditionality for EU-IMF assistance; […]
- Point 54 about the ECB:
[…] notes that throughout the crisis the ECB has had crucial information on the health of the banking sector and financial stability in general, and that with this in mind it has subsequently exerted policy leverage on decision-makers, at least in the cases of the Greek debt restructuring, where the ECB insisted that CACs were to be removed from government bonds it held, the Cypriot ELA operations, and the Irish non-inclusion of senior-bondholders in the bail-in.
And a part of an IMF protocol from 2010 with speculations about the true reasons of the Greek bailout:
- Brazil’s executive director Paulo Nogueira Batista in a prepared statement to the board for the May 9, 2010 meeting:
“The risks of the program are immense…As it stands, the programs risks substituting private for official financing. In other and starker words, it may be seen not as a rescue of Greece, which will have to undergo a wrenching adjustment, but as a bailout of Greece’s private debt holders, mainly European financial institutions.”