Michael Iakovides // 13.06.2016

A lot has been said about the Greek crisis, and the abysmal track record of successive Greek governments. On the other hand, not a lot has been said about the Troika which oversees the Greek bailouts.

To start any conversation of the Greek crisis as a Greek, one must admit the following truths from the start:

– Consecutive Greek governments and Greek society are at fault for the present fiscal situation in Greece.

– Even during the times of crisis, there was no effort to take ownership of the proposed measures and make a clean start.

– There has been no actual effort to try and dismantle the clientelistic, largely socialist and statist apparatus which brought us to the crisis and which is keeping the country down. In fact, the sources of Greece’s problems (bureaucracy, unfree markets, crony capitalism, wasteful spending, an unsustainable pension system) are still there.

– The handling of the Crisis by the current Greek government has been abysmal even by Greek standards.

However, at an international level, one might have expected there to be greater discussion of the role played by the Troika (consisting of the European Commission, the European Central Bank, and the IMF) which monitored the Greek Crisis. In particular, its performance and shortcomings have been largely overlooked.

This is shocking because, three adjustment programmes, 12 reviews and 220 €bn and seven years later, the results are appalling: 179% debt, 0% GDP growth, 25.1% unemployment and no end in sight to the horrible austerity which has blanketed the country. There are various different aspects to the culpability of the institutions. The IMF, which for so many years practically bent its own rules to be part of the Troika, has finally decided that the debt is unsustainable and that there is great need for structural reforms. This is ironic since the Fund has signed off three structural adjustment programmes which started with a 50-50 balance of reforms and fiscal measures, and ended up each time at a 5-95 imbalance in favour fiscal measures (mainly tax increases). The EU has given ammunition to naysayers and far-right and left-wing parties by adopting measures in an undemocratic fashion, primarily through closed-door negotiations. Instead of producing a sustainable solution, the European institutions have tended to kowtow to national governments and to postpone the problem. This so-called ‘extend-and-pretend’ strategy has prolonged and magnified the Greek crisis.

Yet, perhaps the most concerning feature of the Greek showdown is that nobody outside of the players involved really understands how the Troika actually works. The below schema gives some idea of the complexity and confusion of the bailout administrators.

The paper produced by Greek Liberties Monitor highlights the structural deficiencies of the system and the reasons behind it. It argues that there is an acute need for an independent body which would monitor the bailouts at arm’s length from the Troika. In order for Greece to overcome its current predicament, more democracy, more transparency and more openness is required so that Greeks can have ownership of the required reforms, and not fall prey to the populist rhetoric employed by Greek governments.

Such a body would allow reforms, and not just spending cuts, to take root in Greece. Who knows, maybe it could even help to end the Greek crisis, rather than prolong it.

Michael Iakovidis is Co-founder and marketing director of Greek Liberties Monitor. Greek Liberties Monitor’s paper, “Monitoring the Memorandums of Understanding signed by Greece”, can be found here.