EFSF/ESM boss tells half truths about Troika’s doings

Yesterday, Klaus Regling, the Chief Executive Officer of the European Financial Stability Facility and Managing Director of the European Stability Mechanism, went to the European Parliament and was questioned by MEPs, about the anti-crisis role and operations of the ‘Troika’, a construction made up by the EU Commission, the European Central Bank and the International Monetary Fund. He was summoned to testify in the context of the on-going Parliamentarian inquiry on the repercussions of the Troika’s policies applied in four crisis hit countries, Greece, Portugal, Ireland and Cyprus. Regling, despite being a theoretically impartial and unbiased expert, paid handsomely by all Eurozone taxpayers, including the Greeks, the Portuguese, the Irish and the Cypriots, chose to serve only the taxpayers of his own country, Germany. Just for that he should have been fired on the spot by the lawmakers. As a member of the EU administration he is obliged to be unbribable as all self-respecting high ranking Brussels bureaucrats are. Unfortunately, Regling chose to tell half the truth, and this is worse than lying. He reiterated that the remedies had created hardship, but added that “the severity of the crisis had made the decisions taken necessary”. He also said that he “envisaged a system without the IMF in the near future”. Playing with half truths There is nothing more German than all that. For one thing, Regling supports or opposes the presence of the IMF in Europe, exactly following Berlin’s dictums. He also avoided stating how much money the German taxpayer has gained from the ‘help’ accorded to those four countries. It’s not only that. A year ago the IMF chief economist, Olivier Jean Blanchard, recognised that the cure imposed on those four countries was wrong, at least partially. Consequently, Regling’s statement that ‘the severity of the crisis had made the decisions taken necessary’, is not one hundred per cent correct. He chose to hide that. Of course the MEPs didn’t let him get away easily. They disputed Regling’s statement that the Troika had only provided advice. They pointed to him that since the four programme country governments had no room to deviate from this advice, “the Troika had in effect become an enforcer of reforms, without proper democratic safeguards”. Cornered by MEPs They then asked how a possible future system could be made more accountable, transparent, and socially considerate. On this occasion Regling found the opportunity to remind them, that “Member states had opted for the intergovernmental approach to solving the crisis and for the “Troika” solution”. However, he forgot again to say that only the Parliament of his country’s, the Bundestag, has voted to incorporate the IMF in the Troika. This was the only legitimation of IMF’s presence in the Eurozone. Now that Berlin changed his mind, Regling dutifully follows his government U-turn and wants the IMF out. This is not an attitude expected from a self-respecting EU expert, changing his mind according to the position of his country of origin. It’s not Berlin that pays his salary any more, it’s the EU taxpayers and Regling owes allegiance to all of them. Since he doesn’t deliver on that he has to go. To counter the criticism Regling stressed that, “Troika actions had produced positive effects in the case of Ireland, which had left the programme and successfully sold government bonds”. Again he avoided stating that in 2007 Ireland’s sovereign debt was 25% of the country’s GDP. After the Troika’s intervention the debt reached 120% of the GDP in 2012. During the same period, from 2008 to 2012, unemployment in this country skyrocketed from around 5% to 15%. The well paid by the Irish taxpayer CEO of EFSF and ESM again forgot to tell the whole truth and nothing but the truth. So he cannot expect any help from God. Money cures the guilt? At that point, left-of-centre MEPs pointed to the huge social costs, the excessive burdens borne by the poor, the weakened social services, and the way in which wealthy vested interests had been protected from much of the hardship. Economic conditionality had been “like a gun pointed at the country’s head”, they said. Regling had nothing to answer to that. Probably at that moment he was thinking of his six digit remuneration in order to balance his emotions. The sense of guilt balanced with the thought of his lucrative pay. Thank god the Parliamentarians are not chewing their words on this Troika affair. There will be severe decisions with repercussions that Berlin won’t be able to ignore. The two co-rapporteurs, Othmar Karas (EPP, AT) and Liem Hoang Ngoc (S&D, FR) will present their first findings this morning, at a special meeting of the Economic and Monetary Affairs Committee. Regling may present things as he likes, but in this case he won’t be able to impose the will of his Berlin masters.