• Policy research and debate

IPP publishes today the first number of its Working Paper series: EU commission participation in the Troika mission, by António Goucha Soares, Jean Monnet professor of European Law at ISEG/University of Lisbon.

Working papers tend to be more academic in nature, and ultimately serve as a basis for discussion regarding ongoing research projects – with important implications for public policy – which are hosted or supported by IPP, and which may eventually result in articles published in scientific journals.

Download the Working Paper here (PDF) or read on for a brief summary.

This paper starts by describing the traditional role of the European Comission (EC), then proceeds to analyse how this role has been subverted by recent treaties and the economic crisis. It will then discuss the EC’s role in the financial assistance of European countries during the crisis, as well as its consequent accountability.

The predecessor of the EC is the Coal and Steel Community’s Higher Authority. This institution was designed to be an independent authority that acted in the general interest of the community and did not directly represent the interests of any member states. The 1954 Rome Treaties passed on this role to what is now known as the EC.

The EC’s legitimacy traditionally rested on its technical expertise, designed to above all else serve the Union’s best interests instead of the political whims of larger countries. Thus, it was an ally of smaller states and ultimately rebalanced the power within the EU, therefore preventing the damaging political struggles of the past.

However, recent treaties and economic circumstances have conspired to shift this role. Firstly, the EU parliament has gained power at the EC’s expense. Secondly, the EC’s current composition no longer favours its independence. This is because the EC is now proportionately comprised of member state representatives, so that it is no longer a truly supranational entity. An illustration of this is recent perversion of the EC’s power to initiate legislation – increasingly, the EC is used to hasten policies in the interest of specific member states.

As noted, the economic crisis has also contributed to the EC’s loss of independence. This is largely due to its involvement in financial assistance programs. According to the Maastricht Treaty, the ECB was not allowed to bail out struggling member states. To circumvent this, a working group comprised of the IMF, ECB, and EC was assigned the role of financial assistance and supervision. Initially, the EC was involved in the so-called Troika because of its technical expertise.

However, it did not deliver on this promise and ultimately perverted its traditional role as an independent technocratic EU institution. The fact that the EC was closely involved in Troika negotiations and supervision is a case-in-point to this loss of independence. Given that they could withhold loans, the Troika, and therefore, the EC, yielded immense power over struggling nations. In fact, European politicians publicly stated that the Troika had rendered their countries glorified protectorates. As a consequence of its involvement in the Troika, the EC acted on the behalf of certain member states and discarded its responsibility to weaker countries.

To what extent can and should the EC be held responsible for the Troika’s decisions? It is essential to first understand the EC’s failings within the working group. Accounts suggest that as a fiscal supervisor, the EC was even less flexible than IMF financial adjustment hardliners. Furthermore, this financial adjustment was never accompanied by a due commitment to understanding and mitigating the macroeconomic imbalances that were at the root of the European economic crisis.

The EC’s failure to act as a technocratic institution was compounded by its uncritical acceptance of certain pieces of economic research. More specifically, the EC did not challenge the “expansionary austerity” theory that underpinned the Troika’s financial adjustment strategy.

As a consequence, countries like Portugal deepened their recession and saw their public debt and unemployment increase dramatically.

Although Troika leaders have publicly stated that only the countries that enacted the policies are responsible for their outcomes, it is clear that the group’s power played an instrumental role. So can they ultimately be held accountable for their decisions? Because it falls within the jurisdiction of international law, it is unlikely that the IMF can be held accountable. Conversely, as a European institution, under EU law, the EC can be held responsible. Nonetheless, this is made difficult by the fact the Troika was set up outside EU treaties. In practice it is also difficult to pin point the exact extent to which the EC was responsible for the Troika’s decisions.

Download the Working Paper (PDF) and leave your thoughts and comments on this page.

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