P. 1
1869 Blueprint XIX - Web 01

1869 Blueprint XIX - Web 01

|Views: 5|Likes:
Published by Bruegel

More info:

Published by: Bruegel on Jun 17, 2013
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less

07/15/2013

pdf

text

original

Withthedecisionin2010-11toestablishlarge-scalefinancialassistanceprogrammes
for Greece, Ireland and Portugal, the European Union and the International Monetary
Fundembarkedonanunprecedentedendeavour.Itwasthefirsttimeassistancewas
providedwithinamonetaryunionandthefirsttimetheFundandEuropeaninstitutions
cooperatedsoclosely.

Other programmes followed, but they are outside the scope of this study since too
little time has passed to properly evaluate them: in July 2012, Spain was granted
financial support by the European Financial Stability Facility (EFSF), with the
Commission monitoring the resolution of banks, and the Fund providing technical
assistanceonfinancialsectorreform;inApril2013theEuropeanStabilityMechanism
(ESM)boardofgovernorsagreedtograntassistancetoCyprus.

Altogether,anewpatternforcooperationhasbeenestablished,theconsequencesof
which are bound to be important for the fate of European Economic and Monetary
Union (EMU) and for the future relationship between global and regional financial
institutions.

TheGreek,IrishandPortugueseprogrammesareunprecedentedintworespects:

First,becauseofthenatureoftheeconomicproblemtheyareaddressing.Itisthe
first time since the second world war that financially open and mature countries
attempttoadjustwithinamonetaryunion.Thisisachallengingventure,anditisno
surprisethatitinvolvessignificanthardship.Othercountrieshaveadjustedwithin
theconstraintsofapeggedexchangeratesystem–mostrecentlyLatvia.Butthey
werelessopenorlessfinanciallydeveloped.Furthermore,EMUparticipationentails
abidance by a number of rules that do not apply to stand-alone countries. The
resultsoftheeuro-areaprogrammesarethereforeanxiouslyscrutinisedinEurope
andbeyond.
Second, because of the institutional set-up of assistance. Since EMU in 2010 was
not equipped with a crisis management regime, the principles and modalities of

1. Respectively the European Financial Stability Facility, the European Financial Stability Mechanism and the
EuropeanStabilityMechanism.
2. Time did not allow even an early assessment of the Cyprus programme. Nor do we cover the Spanish financial
sectorprogrammebecauseofitissectoralnature.

INTRODUCTION

6

assistance had to be invented in real time in cooperation between the European
institutions and the IMF. The results were the creation of dedicated European
financing institutions – successively the EFSF, the EFSM and the ESM1

– which
providethegreatestpartofthefinancing;andtheassignmentofnegotiationswith
programmecountriestotheTroika,composedoftheIMF,theEuropeanCommission
and the European Central Bank (ECB). It was not the first time the IMF participated
injointprogrammeswithotherinstitutions,includingtheEU,butithadneverbeen
involvedinsuchintensivecooperationwitharegionalinstitution.

These three programmes have already proved to be controversial. Deeply dis-
appointing economic, social and financial outcomes in Greece, disagreements over
thetreatmentofthecreditorsoffailedbanksinIrelandandsocialhardshipinPortugal
haveattractedcriticism.Thestakesarehighforthecitizensofthesecountriesandall
those involved: governments, European institutions, European partners and the IMF.
Also,therehasbeencontinualrenegotiationofthetermsofassistance,especiallyin
the case of Greece, and this has proved to be divisive within the Troika and among
Europeangovernments.

Thisstudyisintendedtohelpdrawlessonsfromthe2010-12experienceoffinancial
assistance programmes in Greece, Ireland and Portugal2

. Its aim is to provide an
objective assessment that can serve as a basis for serious debate and reform
initiatives.Itaddressesboththeeconomicandtheinstitutionalaspectsoftheissue:
theprogrammes’achievementsandshortcomings,takingintoaccounttheparticular
constraints arising from participation in EMU but ignoring the respective roles of the
various institutions involved; and the cooperation between the IMF and European
institutionswithintheTroika.

The conclusions from this evaluation primarily apply to the programmes in the three
countries.ButtheyareofbroaderrelevanceforotherEMUcountries,fortheEuropean
policysystemandforcooperationbetweentheIMFandtheEuropeaninstitutions.The
conclusions may also shed light on discussions about cooperation between global
andregionalfinancialinstitutionsinAsiaandelsewhere.

7

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->