It is not an institutional body, yet it has the power to unlock aid packages for countries in crisis, such as Greece. Some clarity on the meaning and workings of the troika.
For some years now, the word troika has come up repeatedly in political and journalistic debate. To be precise, since 2011, when the Greek crisis was living through its most dramatic moments and a way out was being frantically sought. But what is the troika, and why did it have so much power over the government and people of Greece?
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The first thing to clarify about the troika is that it is not an international organisation in the strict sense. In other words, it has no formalised rules, no precise mechanisms for appointing members, no elected president. No European laws clearly set out which procedures or decisions formally belong to the troika.
The troika is an informal oversight body made up of three institutions: the European Central Bank (ECB), the European Commission (EC) and the International Monetary Fund (IMF).
The alliance was born in the midst of the economic crisis that upended the Old Continent, with the aim of overseeing aid packages for eurozone countries. The most striking case is that of Greece: to prevent its default, a total of 326 billion euros was disbursed across three separate bailout operations. The troika is essentially the body that gives the green light to these packages and, above all, determines their conditions.
And it is precisely on the question of conditions that the fiercest clashes have erupted, because, until now, international aid has only been disbursed once the country involved committed to restoring its public finances and meeting the obligations undertaken before the international community. The path promoted (and imposed) by the troika is that of austerity. Its meaning was laid out in great detail during the Greek crisis: cuts to public spending on healthcare, education and services; structural reforms; privatisation of entire sectors; pension reforms; redundancies and wage cuts in the public sector.
Beyond the specific measures sought by the troika, moreover, there is another issue to consider. An international and informal body has, in practice, intervened in the internal political choices of individual states; it is therefore inevitable to reflect on the question of national sovereignty.
Having explained what the troika is and what role it played in the economic crisis that shook Europe, it is worth clarifying in greater detail who its members are.
The European Central Bank (ECB) is the central bank of the 19 member states of the Union that have adopted the euro (excluded, therefore, are Bulgaria, Croatia, Denmark, Poland, the Czech Republic, Romania, Sweden and Hungary, as well as, of course, the United Kingdom, which even before Brexit had never joined the single currency). Its primary objective is to maintain price stability in the area, preserving the purchasing power of the single currency. It is worth emphasising, therefore, that the European Central Bank does not issue currency.
The president of the ECB is Mario Draghi and the vice-president is the Portuguese Vítor Constâncio. The main decision-making body is the Governing Council, made up of the six members of the Executive Board and the governors of the central banks of the euro area countries.
The European Commission is the politically independent executive arm of the Union. In practice, it is the only body authorised to propose legislation to the European Parliament (elected by the citizens of member states) and to the Council of the European Union (where ministers from member states meet, each for their own area of competence). Furthermore, by virtue of its executive powers, it is the body that implements the decisions taken by these two chambers. The Commission plays a decisive role in economic matters because it helps to define the Union's spending priorities, prepares the annual budgets (which Parliament and the Council must then approve) and monitors the way in which funds are used, under the supervision of the Court of Auditors.
The European Commission is made up of 28 commissioners, each of whom holds a specific portfolio assigned to them by a president; the mechanism is reminiscent of our own government, headed by a prime minister and composed of a series of ministers. The primary roles in the troika were played by the President of the Commission, Jean-Claude Juncker, and Olli Rehn, who at the time of the Greek crisis was Commissioner for Economic and Monetary Affairs; he now sits on the board of the Finnish central bank.
Established in 1945 in the wake of the Bretton Woods conference, the International Monetary Fund is composed of the national governments of 189 countries. Its main task is to extend loans to member states or to restructure the external debt of developing countries. The IMF's capital is made available by its members, who pay a quota proportionate to their weight in the global economy. Voting power is also determined on the basis of quotas.
There are two governing bodies: the Board of Governors, which meets in full session once a year, and the Executive Board, made up of 24 members, each of whom represents a country or group of countries. The Managing Director is Christine Lagarde.
