February 17, 2020

Policy ‘Troika’ for Europe Financial Woes at Odds

Throughout much of Europe’s seemingly unending economic crisis, Mr. Rehn and the I.M.F. chief have been an inseparable part of a curious policy-making ménage à trois known as the “troika,” a trio that also includes the European Central Bank.

The tensions at the heart of this intimate but unwieldy arrangement, however, have now burst into the open with an unusual bout of finger-pointing over policies that have pushed parts of Europe into an economic slump more severe than the Great Depression and left the Continent as a whole far short of even Japan’s anemic recovery.

The blame game, initiated by a highly critical internal I.M.F. report released this week in Washington, has put a spotlight on a question that has lurked in the shadows throughout the troika’s efforts to get a grip on Europe’s economic mess: Is it time for a divorce?

Speaking Friday at an economic conference in his home country of Finland, Mr. Rehn, the usually phlegmatic commissioner of economic and monetary affairs, sounded like a put-upon spouse in a messy breakup. “I don’t think it’s fair and just for the I.M.F. to wash its hands and throw dirty water on the Europeans,” he said.

He was responding to assertions by the I.M.F. that the European Commission, the union’s executive arm, had blocked proposals back in 2010 to make investors share more of the pain by writing down Greece’s debt and, more generally, had neglected the importance of structural reforms to lift Europe’s sluggish economy.

Simon O’Connor, Mr. Rehn’s spokesman, said the report had made some valid points, but he derided as “plainly wrong and unfounded” a claim that the commission had not done enough to promote growth through reform. On this issue and events in Greece, Mr. O’Connor said, “We fundamentally disagree.”

Left-wing politicians who have long denounced the troika as an alien and unaccountable force are muttering “told you so” and complaining that putting policy in the hands of a triumvirate of unelected institutions could never work.

“The troika is constructed in such a way that it is untouchable, and that is the end of democracy,” said Udo Bullmann, a Socialist member of the European Parliament’s Economic and Monetary Affairs Committee from Germany and a strong critic of austerity measures that have formed the core of the troika’s policy prescription for Europe’s ailing economies.

“What is this troika?” asked Mr. Bullmann. “It has no address and no telephone number. Who do you talk to?” He said the troika was designed to diffuse and thus dodge responsibility. “Decisions are made in a nontransparent and nondemocratic way so that nobody has to take the blame,” he said.

Charles H. Dallara, a former United States Treasury Department official who represented the banking industry in negotiations with the troika over Greece, said that the I.M.F. and the European Commission were never as united as they often seemed and were bound to come to blows at some point.

“It is very difficult to have three cooks in the kitchen all the time. That is just life,” said Mr. Dallara, who now works for a private equity company based in Switzerland. “You need one institution driving negotiations. You don’t need three.”

The idea of yoking three together to address Europe’s troubles dates back four years to when it became clear that Greece, the weakest member of the 17-nation zone that uses the euro, would need a bailout to stave off bankruptcy. Northern European countries, particularly Germany, demanded that the I.M.F. play a role in order to share both the cost of a bailout and the blame for imposing tough terms.

Jack Ewing contributed reporting from Frankfurt, and James Kanter from Brussels.

Article source: http://www.nytimes.com/2013/06/08/world/europe/policy-troika-for-europe-financial-crisis-has-splits.html?partner=rss&emc=rss

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