Troika (European group)#Critics of the Troika

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{{See also|Euro area crisis}}

{{See also|2008 financial crisis}}

The term Troika has been widely used in Greece, Cyprus ({{langx|el|τρόικα}}),{{cite web |url = http://www.ert.gr/index.php/eidiseis/ellada/37-oikonomia/2817-q-q-.html |title = "Τεστ αντοχής" από την τρόικα ("Stress test" by the Troika) |author = Hellenic Broadcasting Corporation |date = 6 May 2011 |publisher = www.news.ert.gr |language = el |access-date = 6 May 2011 |url-status = dead |archive-url = https://web.archive.org/web/20110506203146/http://www.ert.gr/index.php/eidiseis/ellada/37-oikonomia/2817-q-q-.html |archive-date = 6 May 2011 }}{{cite web |url = http://www.kathimerini.com.cy/index.php?pageaction=kat&modid=1&artid=167299 |title = Διεκδικητική στάση έναντι της Τρόικας ζητά η ΕΔΕΚ (EDEK Asks for Assertiveness Against the Troika) |author = Kathimerini Newspaper Newsroom/Cyprus News Agency |date = 2 April 2014 |publisher = www.kathimerini.com.cy |language = el |access-date = 5 April 2014}} Ireland,{{cite web |url = http://www.rte.ie/news/av/2011/0415/media-2943271.html |title = RTÉ.ie Extra Video: EU/IMF rescue package – troika briefing |author = RTÉ News |date = 15 April 2011 |publisher = www.rte.ie |access-date = 6 May 2011 |url-status = dead |archive-url = https://web.archive.org/web/20110418143306/http://www.rte.ie/news/av/2011/0415/media-2943271.html |archive-date = 18 April 2011 }} Portugal,{{Cite web|url=http://ecosfera.publico.pt/noticia.aspx?id=1500246 |title=Estudo entregue à troika propõe fecho de 800 km de linha férrea|author=|date=26 June 2011 |website=Publico.pt |language=pt|access-date=28 June 2011}} and Spain{{Cite news |url=http://economia.elpais.com/economia/2012/06/11/actualidad/1339398901_234629.html |title=La troika vigilará que se cumplan las reglas pactadas para el rescate |newspaper=El País |date=11 June 2012 |language=es |access-date=11 June 2012}} to refer to the consortium of the European Commission, the European Central Bank and the International Monetary Fund that provided a bailout to these states since 2010, and the financial measures and government policies that the three institutions have demanded to be implemented in return by Greece and the other nations concerned. Slovenia barely avoided intervention by the Troika in 2013, thanks to the loan of EUR 1.5 billion from PIMCO.{{cite news |url=http://www.delo.si/ozadja/halo-slovenija-placaj-in-trojke-ne-bo.html |title=Halo, Slovenija? Plačaj, in trojke ne bo! |language=sl|trans-title=Hello, Slovenia! Pay and There Will Be no Troika |date=12 December 2016 |newspaper=Delo.si}} These institutions had wide influence and increased their power over time. They implemented a strong austerity program for the adjustment of Greek fiscal measures. The political impact of the austerity imposed on countries of the EU periphery, which were confronted with significant debt, led to "a predominant economic and social dislocation".[Kinsella, Maurice; Kinsella, Ray. (2018), Troikanomics: Austerity, Autonomy and Existential Crisis in the European Union, Palgrave Macmillan, 217p.

The origin of the European Troika can be traced back to the Greek loan package of May 2010{{Cite web |url=https://www.esm.europa.eu/publications/safeguarding-euro/enter-troika-european-commission-imf-ecb |title = 8. Enter the troika: The European Commission, the IMF, the ECB | European Stability Mechanism| date=4 August 2019 }} and the EFSF. The work of the three members were distinct: the IMF co-financed the loans for Greece, the ECB focused its competences on the banking system and the Commission worked on economic reforms with the IMF. The "Troika solution" was controversial in the Euro crisis' solution following the Lisbon Treaty, as supranational organizations increased their presence among the institutional landscape of the European Union. At this time, the EU was more technocratic and emphasised the controlling aspect of the Troika mechanism. During the crisis period, Germany played a dominant role and took power to rebalance its national interests. The European strategy was implemented with the goal of reducing the Greek fiscal deficit from 15% to 5%.{{cite web|url=https://scholar.harvard.edu/files/hall/files/hall2016_insrchofeur.pdf|title=The Euro Crisis and the Future of European Integration|website=Scholar.harvard.edu|author=Peter A. Hall|access-date=19 March 2022}} In 2015, the GDP of Greece remained stagnant compared to 2009, and the loans appeared to be insufficient to achieve the fiscal goals fixed by the Troika: 90% of the amount paid interest.

For Cyprus, Greece (thrice), Ireland and Portugal, the European Commission, the ECB and the IMF agreed on Memoranda of Understanding with the relevant governments in a three-year financial aid programme on the condition of far-reaching austerity measures to be imposed on their societies in order to cut government expenditure.{{cite news|url=https://www.theguardian.com/business/ireland-business-blog-with-lisa-ocarroll/2010/nov/28/ireland-bailout-full-government-statement|title=Government Statement on the announcement of joint EU – IMF Programme for Ireland|work=The Guardian|first=Lisa|last=O'Carroll|date=2010-11-28|access-date=2015-01-05}}

For details in each case, see

• Economic Adjustment Programme for Cyprus
• First Economic Adjustment Programme for Greece
• Second Economic Adjustment Programme for Greece
• Economic Adjustment Programme for Ireland
• Economic Adjustment Programme for Portugal

Social benefits and wages could not be sustained due to the crisis. With a deteriorating social situation and weak domestic production, growth of Greek debt overtook the GDP rate. For the creditor countries, one of the most important conditions for the bailout was the liberalisation of production and the labour market in Greece.{{citation needed|date=September 2020}} Reforms taken in a context of fiscal austerity can have negative effects without short-term improvement.{{citation needed|date=September 2020}}

The term troika has its origins in the Russian word for a three-horse carriage, but it is also used to describe an informal alliance between three actors. In the context of the Euro crisis, the term 'Troika' refers to the cooperation between three actors: the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF).{{cite book |last1=Tuori |first1=Kaarlo|author-link=Kaarlo Tuori |last2=Tuori |first2=Klaus |title=The Eurozone Crisis |publisher=Cambridge University Press |isbn=9781107297289 |pages=104–105}}

The Troika set out the conditions under which financial assistance, or promises of assistance, would be approved to European countries in financial difficulties. When the three organisations offered assistance, the necessary measures and reforms were imposed in the form of a Memorandum of Understanding between the Troika and the Member States concerned.{{cite book |last1=Dijsselbloem |first1=Jeroen |title=Safeguarding the Euro in times of crisis |year=2019 |publisher=Publications Office |doi=10.2852/788601|isbn=9789295085336 }}

The legal basis for the action taken by the Commission and the ECB is considered debatable. The creation of this mechanism was due to a political and legal gap in the Treaty of Maastricht. Article 125 TFEU together with article 123 TFEU prevents countries of the eurozone with financial problems from being supported by other stakeholders, like the European Central Bank, European Union institutions or other Eurozone countries within the Monetary Union.{{cite journal |last1=Soares |first1=Antonio |title=EU Commission participation in the Troika mission: is there a European Union price to pay? |journal=Rev. Bras. Polít. Int. |volume=58}} Therefore, the competences of the Troika originated in a statement taken by the Heads of State and Government of the EU member states to establish a joint programme and to provide conditional bilateral loans to Greece.{{cite web |last1=European Council |title=Statement by the heads of state and government of the euro area |url=https://www.consilium.europa.eu/media/25673/20100502-eurogroup_statement_greece.pdf}} The Troika falls outside the scope of European law.

The Troika can be considered as a working group in charge of negotiating financial assistance programmes with indebted Eurozone countries. Apart from that, it also carries out evaluations of the implementation level of the programme. The financial assistance in itself is provided by special mechanisms, such as the European Financial Stability Facility (EFSF), the European Financial Stabilisation Mechanism (EFSM) and the European Stability Mechanism (ESM). These financial programmes are concluded outside the European Treaties, and thus outside of the jurisdiction of EU law. However, all EU institutions should act in accordance with the Rule of Law, even when exercising authority outside of the Treaties.Art. 3, §6 TEU; Art. 4 in fine TEU.

A role for the International Monetary Fund (IMF) as a member of the Troika was not considered at the time. Firstly, this organisation is an 'outsider'; it is not an institution of the European Union. A second objection was that relying on the IMF's help was an admission of failure of the Eurozone, and a dent in confidence in the euro. In the months leading up to the euro crisis, the IMF already had concerns that countries in the European periphery would be a potential threat to the other major financial markets in Europe via their commercial banks' balance sheet exposures. When the first effects of the crisis emerged in Greece, the IMF was kept at a distance. The EU saw this as an internal matter and wanted to resolve it internally, yet the IMF was pulled in eventually. It was seen as a reliable, neutral organisation that had expertise in helping highly indebted countries. The IMF was responsible, together with the finance ministers, for the decision-making in the financial programmes.{{cite book |last1=Dijsselbloem |first1=Jeroen |title=Safeguarding the Euro in times of crisis, the inside story of the ESM |publisher=Publications Office of the European Union |date=2019 |doi=10.2852/788601|isbn=9789295085336 }}

The role of the European Commission within the European Troika was to participate in the Troika negotiations and the periodical supervising exercises on behalf of the Eurozone Member States that provided the loans to the Eurozone (EZ) countries in financial need.{{cite web |last1=European Commission |title=Mededeling van de Commissie, een routekaart voor stabiliteit en groei |url=https://ec.europa.eu/transparency/regdoc/rep/1/2011/NL/1-2011-669-NL-F1-1.Pdf}}{{cite journal |last1=Soares |first1=Antonio |title=EU Commission participation in the Troika mission: is there a European Union price to pay? |journal=Rev. Bras. Polít. Int. |date=2015 |volume=58 |page=110 |doi=10.1590/0034-7329201500106 |doi-access=free |hdl=10400.5/26481 |hdl-access=free }} This function raised some concerns with the 'independent' function of the European Commission within the EU's political framework. According to article 17 of the TEU "the Commission has to act completely independent in carrying out its responsibilities, and they shall refrain from any action incompatible with their duties or the performance of their tasks."Article 17 TEU.

The fact that the Commission was acting on behalf of the member states in the case of financial assistance programs was far removed from its political role. The question remains as to how the Commission can reconcile its task within the EU and within the Troika. By acting on behalf of some Member States, the Commission is departing from its independent position.{{cite book |last1=Tuori |first1=Kaarlo |last2=Tuori |first2=Klaus |title=The Eurozone Crisis |publisher=Cambridge University Press |isbn=9781107297289 |pages=104–105}}

Formally the European Central Bank (ECB) does not participate in the decision-making of the programme, these decisions are taken by the IMF and the Finance ministers of the Member States. The role of the ECB can be divided into three groups: A first aspect is the role of verbal interventions addressed to distressed Member States and financial markets. Its second role is the one where the ECB changes collateral policy and large-scale medium-term liquidity creation to encourage markets to invest in higher-yielding government bonds. Its third and most controversial role is the one where the ECB launches the Securities Market Programme, a kind of shaping programme that targets fiscal adjustment and structural reforms in the fiscal policy of individual member states.{{cite web |last1=European Parliament |title=The role of the European Central Bank in the design and implementation of financial measures in crisis-hit countries |url=https://www.europarl.europa.eu/RegData/etudes/ATAG/2016/570000/IPOL_ATA(2016)570000_EN.pdf |publisher=European Parliament Policy Department}} The ECB also provides advice and expertise on a broad range of issues relevant to the monetary policy and the financial stability of the eurozone countries.

The consequences of the decisions taken by the European Troika resulted in many critics both within the European institutions and at national levels. The European Parliament was excluded from negotiations {{cite web |title=The Eurozone's Crisis of Democratic Legitimacy: Can the EU Rebuild Public Trust and Support for European Economic Integration? |url=https://ec.europa.eu/info/sites/info/files/dp015_en.pdf |publisher=Publications Office of the European Union |access-date=6 March 2020}} and therefore decided to establish a special committee of inquiry led by the Austrian centre-right MEP Othmar Karas{{cite news |title=MEPs launch Troika inquiry |url=https://euobserver.com/tickers/122094 |access-date=9 March 2020 |agency=EUOBSERVER}} in order to analyse the level of the Troika's accountability. According to the findings of the committee, the Troika's members had highly asymmetric distribution of responsibilities. In addition, differing mandates together with varying negotiation and decision-making structures only led to more divisions and made it difficult to find a common approach.{{cite web |title=Troika helped to avoid the worst, but flawed structure harmed recovery |date=13 March 2014 |url=https://www.europarl.europa.eu/news/et/press-room/20140307IPR38407/troika-helped-to-avoid-the-worst-but-flawed-structure-harmed-recovery |publisher=European Parliament |access-date=5 March 2020}} The British MEP Sharon Bowles observed that the response to the crisis lacked transparency and even credibility.{{cite web |title=Troika's overall response to the crisis has lacked transparency and at times credibility |date=11 April 2013 |url=https://www.europarl.europa.eu/news/en/headlines/priorities/troika/20131104STO23604/troika-s-response-to-crisis-has-lacked-transparency-and-at-times-credibility |publisher=European Parliament |access-date=1 March 2020}} In fact, the Troika had questionable legal basis at all because it was established as an emergency solution.{{cite web |title=Report Plenary sitting on the enquiry on the role and operations of the Troika (ECB, Commission and IMF) with regard to the euro area programme countries (2013/2277(INI)) |url=https://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+REPORT+A7-2014-0149+0+DOC+PDF+V0//EN&language=EN |publisher=European Parliament |access-date=7 March 2020}} German politician Norbert Lammert stated that in his view it was incorrect to discuss the lack of democratic legitimacy of the Troika since the adjustment programmes had been approved by the parliaments of Ireland, Portugal, Cyprus and Greece; however, the parliaments did not know the implications when they approved the programmes.{{cite web |title=Parliamentarians call for more legitimacy in economic policy-making in the EU |date=23 January 2014 |url=https://www.europarl.europa.eu/news/en/headlines/priorities/troika/20140122STO33435/parliamentarians-call-for-more-legitimacy-in-economic-policy-making-in-the-eu |publisher=European Parliament |access-date=9 March 2020}}

The Troika interventions generated long-lasting political damage not only for the European Union{{cite news |title=Repairing the political damage caused by the Troika |url=https://www.euractiv.com/section/euro-finance/opinion/repairing-the-political-damage-caused-by-the-troika/ |access-date=9 March 2020 |agency=EURACTIV}} but also for the member states themselves. Many European citizens claimed that the budget cuts resulted in the EZ's longest recession since the creation of the Euro single currency in 1999.{{cite news |title=Rehn and Reding clash on troika's future |url=https://www.euractiv.com/section/elections/news/rehn-and-reding-clash-on-troika-s-future/ |access-date=9 March 2020 |agency=EURACTIV}} During that period, the efficiency of the Troika was another cause of concern but the ECB president Jean-Claude Trichet tried to reassure people and highlighted the fact that "if nothing had been done for Greece, the impact of the crisis would have been undeniably worse for this country". As it turned out, the Troika underestimated the impact of austerity policies on economic growth.

Another problem was in the different philosophies in relation to economic policy across the EC, the ECB and the IMF according to the European Commissioner in charge of economic and monetary affairs Olli Rehn.{{cite news |title=Parliament seeks tougher controls on Troika |url=https://www.euractiv.com/section/euro-finance/news/parliament-seeks-tougher-controls-on-troika/ |access-date=5 March 2020 |agency=EURACTIV}} Whereas the IMF advocated for more robust debt relief, the EU insisted on more limited options. The European institutions prioritised the maintenance of cohesion and protection of their own rules.{{cite web |title=Greek Bailout: IMF and Europeans Diverge on Lessons Learnt |date=16 August 2018 |url=https://www.chathamhouse.org/expert/comment/greek-bailout-imf-and-europeans-diverge-lessons-learnt |publisher=Chatham House |access-date=9 March 2020}} Also, the members of the Troika could not agree upon potential risks of financial spillovers across member states of the EZ. For the European institutions, this was a very sensitive topic; this is why the objective was to avoid debt restructuring.{{cite web |title=EU-IMF assistance to euro-area countries: an early assessment |url=https://www.bruegel.org/wp-content/uploads/imported/publications/1869_Blueprint_XIX_-_web__.pdf |publisher=Bruegel |access-date=8 March 2020}} If the Troika had paid more attention to cross-country spillovers and deteriorating conditions, the consequences could have been less harmful.{{cite web |title=Europe's Troika should grow up |url=https://www.bruegel.org/2013/06/europes-troika-should-grow-up/ |publisher=Bruegel |access-date=7 March 2020}}

The academic community criticised the Troika, accusing it of having immense power{{cite journal |last1=Cohen S., Guillamón M.-D., Lapsley I. and Robbins G.|title= Accounting for austerity: The Troika in the Eurozone|journal= Accounting, Auditing & Accountability Journal|date=17 August 2015 |volume=28 |issue=6 |pages=966–992 |doi=10.1108/AAAJ-04-2014-1668 |hdl= 10379/10833|url=https://www.pure.ed.ac.uk/ws/files/19948897/Lapsley_I._Accounting_for_Austerity.pdf }} and pursuing an approach of fiscal conservatism.{{cite journal |last1=Malsch, B and Gendron, Y |title=Reining in auditors: On the dynamics of power surrounding an "innovation" in the regulatory space |journal=Accounting, Organizations and Society |date=October 2011 |volume=36 |issue=7 |pages=456–476 |doi=10.1016/j.aos.2011.06.001 |doi-access=free }} Scholars such as Kevin Featherstone, Judith Clifton, Daniel Diaz-Fuentes and Ana Lara Gómez came to the conclusion that austerity policies in Greece were more harsh than in Ireland, emphasising political and socio-economic consequences, specifically unemployment, emigration, and deterioration of citizens' physical and mental health.{{cite journal |last1=Clifton, J., Fuentes, D. and Gómez, A. |title=The crisis as opportunity? on the role of the Troika in constructing the European consolidation state |journal=Cambridge Journal of Regions, Economy and Society |date=4 October 2018 |volume=11 |issue=3 |pages=587–608 |doi=10.1093/cjres/rsy021 |url=https://academic.oup.com/cjres/article-abstract/11/3/587/5115655|hdl=10902/31559 |hdl-access=free }}{{cite journal |last1=Featherstone, Kevin |title=External conditionality and the debt crisis: the 'Troika' and public administration reform in Greece |journal=Journal of European Public Policy |date=2015 |volume=22 |issue=3 |pages=295–314 |doi=10.1080/13501763.2014.955123 |s2cid=153497144 |url=http://eprints.lse.ac.uk/63379/1/External%20conditionality%20and%20the%20debt%20crisis.pdf |access-date=9 March 2020}} Other critics of the Troika included Yanis Varoufakis, a former Greek finance minister;{{Cite web |url=https://www.yanisvaroufakis.eu/books/adults-in-the-room/|title=Adults in the Room|website=Yanisvaroufakis.eu|date=May 30, 2017}}{{Cite book|url=https://www.audible.com/pd/Adults-in-the-Room-Audiobook/B075X31PTR|title=Adults in the Room |via=Audible.com}} German writer and publisher of Die Gazette Fritz R. Glunk; and Noam Chomsky.{{Cite web |url=https://www.dtv.de/buch/fritz-r-glunk-schattenmaechte-26175/ |title=Schattenmächte von Fritz R. Glunk |website=Dtv.de}}{{Cite web |url=http://tech.mit.edu/V120/N46/46chomsky.46n.html |title=Chomsky Offers Insight Into IMF, World Bank |website=Tech.mit.edu |access-date=2019-01-28 |archive-date=2011-11-21 |archive-url=https://web.archive.org/web/20111121171750/http://tech.mit.edu/V120/N46/46chomsky.46n.html |url-status=dead}}

This term was used in the European Union when referring to a triumvirate composed of the Foreign Affairs Minister of the Member State holding the (rotating) Presidency of the Council of Ministers, the Secretary-General of the Council of the European Union (who also held the post of High Representative of the Common Foreign and Security Policy), and the European Commissioner for External Relations. The "troïka" represented the European Union in external relations that fell within the scope of the common foreign and security policy (CFSP).

With the 2009 ratification of the Lisbon Treaty, the post of Secretary-General of the Council was separated from the post of High Representative for the CFSP, which then assumed the responsibilities of the European Commissioner for External Relations. Since only two of the original posts making up the troika still exist, the definition of a triumvirate is no longer met.

• European debt crisis
• 2012–13 Cypriot financial crisis
• Greek government-debt crisis
• Post-2008 Irish banking crisis
• 2010–14 Portuguese financial crisis

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