By Stefanos Evripidou
Decision-making on the bail-in or bailout of ailing Eurozone countries has to be put on a more democratic and institutional footing so that mistakes of the past regarding the troika are not repeated, a delegation of the European Parliament (EP) said yesterday.
One of its members also blamed politicians and officials for failing to deal with the systemic problems facing Cyprus, preferring instead to paint a rosy picture.
The delegation was here as part of a probe into the legality, democratic legitimacy and impact of the troika of international lenders on members of the Eurozone needing a bailout.
The members of the EP Committee on Finance plan to visit all bailed-out countries of the Eurozone (Ireland, Portugal, Greece and Cyprus) before compiling a report proposing changes for the future.
EP Vice President and co-rapporteur Othmar Karas said the aim is to write a report on the work of the troika, the decision-making process, the role of member states, cooperation between the different institutions “and what can we do in the future better because we have an imbalance between public opinion and the negotiation process”.
“Citizens have the right to be informed about possible mistakes or excessive and unjustified demands. Errors and misjudgements should not be repeated in the future,” Karas said.
The delegation’s motivation is to ensure decisions in the EU are “transparent, based on democratic legitimacy and control”, which in effect means greater engagement from European citizens and EP involvement.
In future, all crisis resolution instruments used must become part of the EU Treaty in the long-run, he argued.
Co-rapporteur, French Socialist MEP Liêm Hoang Ngoc said the EP was shocked to hear just a few weeks after Dutch Finance Minister Jeroen Dijsselbloem took over the Eurogroup, talk of a bail-in using insured deposits.
“From the point of view of the EP we were shocked because there is a European directive which protects deposits, a deposit guarantee for under €100,000,” he said.
He added that after meetings with the government, parliament and former finance ministers, the delegation is in a much better position to know what exactly happened in Cyprus.
“All of this was not transparent for us.”
Ngoc said agreements and negotiations between national governments and the troika are simply not known to the public.
To avoid the kind of murky decision-making processes that took place before the Cyprus bailout and others, he recommends greater EU integration, but only if more democratic procedures are introduced in tandem.
Responding to a question whether the EP delegation was rather conducting a “post mortem” with its report, Finnish Liberal MEP Nils Torvalds said: “I think it’s a postmortem because all European countries, including Finland, lived in an illusion.”
He added: “One of the systemic problems in all European countries is politicians, who easily duck the problems.”
He argued that if politicians in the bailout counties had taken the problems seriously three, four or five years earlier, “we wouldn’t be in this mess”.
Regarding Cyprus, Torvalds said: “You were treated in a different way because politicians and officials weren’t able to judge how deep the Greece problems were. And now you’re paying a price for those mistakes.
“We should be very careful when leaving room for populism and should stand up and try to be as honest as possible,” he added.
German United Left MEP Jurgen Klute said the best way to solve the problem in the Eurozone is to have a fiscal and social union, in addition to the monetary union. No country without a common fiscal policy has ever survived in history, he said.
During the delegation’s meeting at the Cypriot parliament, MPs accused the troika of double standards. DISY leader Averof Neophytou said €48bn were allocated for the support of Greek banks following the haircut on Greek debt but no capital was given to Cypriot banks, which saw €4.5bn of their Greek bond holdings disappear.
He also highlighted that deposits in Cypriot branches in Greece were exempt from the haircut imposed despite the fact that the former Laiki Bank’s biggest problems regarding non-performing loans were in its Greek operations.
The troika is due to return to Cyprus at the end of the month for its third review of Cyprus’ adjustment programme.