Eurozone governed by an obscure body and gray procedures

The Eurogroup, the crucial European decision-making body, regrouping the 17 EU ministers of Finance of the countries using the euro, which has led the south of Europe to the worst economic recession after WWII and introduced the haircut on bank deposits, the until this week most secure financial asset, is an informal forum, who’s decisions have to be officially approved by the ECOFIN, the Council of the 27 EU ministers of Finance. It is questionable how and when Eurogroup’s latest decisions on Cyprus, were approved by the ECOFIN. The Eurogroup meets regularly once a month in the night of the day before ECOFIN is convened, usually Monday and Tuesday at the beginning of every month. This is so, exactly because the Eurogroup is not an official EU body and its decisions have to be approved the next day by the ECOFIN, in order to become legal. The problem is however that all those draconian decisions formulated this week by the Eurogroup on Cyprus, have not been approved by the ECOFIN, at least not yet. How Eurozone is governed In short the tormented island is now suffering with no official EU decision taken. The same was true in all the previous urgently taken crucial decisions on Greece, Spain, Ireland and Portugal. Actually on many decisive moments the Eurogroup met over the internet in a teleconference, a fact that didn’t impede it to take very important decisions. Those decisions were later on legalised in the ECOFIN, where some ministers of Finance were obviously annoyed to play a role of walkon. Of course the problem described here is not a procedural or bureaucratic one, but a deeply political issue. In the face of it however, all those crucial Eurogroup decisions were undersigned by the ECOFIN only at a later stage. This was the case for the Memorandums of Understanding agreed between the troika of EU-ECB-IMF and the three Eurozone programme countries. With those MoUs Greece, Ireland and Portugal introduced unheard before austerity programmes, which drove them to a vicious cycle of debt and recession. The same is true for Italy and Spain where austerity was not typically imposed by the troika but it was rather self-imposed. It is also true that in practice, even within this informal forum that the Eurogroup is, not all of its 17 member ministers of Finance are playing an active role. As a matter of fact persons like the general manager of IMF, Christine Lagarde, and the governor of ECB, Mario Draghi, both of whom do not hold a permanent position in the Eurogroup, the two of them however play not only an active role in the discussions and the decision-making, but their opinion is pivotal in the dealings. At the same time most of the 17 Eurozone ministers of Finance are not even present in the crucial meetings. They drink coffee outside. It was very characteristic that in the most important meeting of Friday night and Saturday morning on 15-16 March, some ministers of Finance were not even allowed to be present while the ‘inner circle’ was negotiating with the Cypriots. Actually there were a lot of grievances over this. Many ministers of Finance complained openly that the ‘inner circle’ wanted them just to approve what was already decided. Who dictates the decisions It is easy to imagine that the inner circle is made up by Wolfgang Schauble, the German Federal minister of Finance, Mario Draghi, governor of the ECB, Christine Lagarde, Managing Director of IMF, Jeroen Dilsselboem, President of Eurogroup and minister of Finance of Holland, Olli Rehn, Vice President of the European Commission, plus the French minister of Finance Pierre Moscovici and of course the until recently President of Eurogroup, Jean-Claude Juncker, Prime Minister and minister of Finance of Luxembourg. Apart from those key figures, the participation of some more ministers may be considered at times as necessary and those are the Austrian minister of Finance Maria Fekter, the Finnish minister of Finance Jutta Urpilainen, the Spanish minister of Finance Luis De Guindos, the Irish minister of Finance and currently president of ECOFIN Michael Noonan and the Greek minister of Finance Yiannis Stournaras. This is probably the whole list. As for the ministers of Slovakia, Slovenia, Malta and Estonia their presence is rather nominal. In such an obscure and precarious context were formulated Eurogroup’s crucial decisions during the last two years, which drastically changed the face of the Eurozone’s economy. Simply they have been dictated by the inner circle. The rest of the participants played a secondary role, even when those decisions concerned them directly. The interesting thing is that the decision-making process is neither institutional nor legitimised by the European Parliament. In the best of cases the programmes are at a later stage approved by the EU Summit of the 27 leaders and voted for by the legislatives, national and European. The initial ‘no’ of the Cypriot Parliament perturbed the entire Eurogoup. Later on the Cypriot legislators got ‘wise’ and passed the seven laws to confiscate the bank deposits. In every case though all the basic ingredients of the decisions have been formulated by the inner circle of the atypical Eurogroup. It’s the triumph of power over fairness, in a procedure where the European Union institutions and procedures melt down before the political and economic might. Understandably that’s why the Eurogroup remains an atypical forum. The powerful ones don’t like institutions and standard procedures.