Troikanomics

Austerity, Autonomy and Existential Crisis in the European Union

Ray Kinsella, Maurice Kinsella

• Publisher: Palgrave Macmillan
• Year: 2018
• ISBN:
  9783319970707
• Topic: Business
• Subtopic: International Business
• Index: Business

The 'Troika' is a word that is scorched into the narrative of the EU's banking and economic crisis – a triumvirate constituted by the European Central Bank, the European Commission and the International Monetary Fund. The modus operandi of the Troika is defined by the authors of this book as 'Troikanomics'.

Ostensibly, the role of the Troika was to develop, coordinate and oversee the provision of conditional funding to support national governments in restructuring their economies. In fact, their power and influence extended far more widely. They enforced an unprecedentedly severe austerity programme of fiscal and structural adjustment through oppressive political oversight. Their practical impact was to impose on debtor countries in the EU periphery the single greatest economic and social dislocation in Europe's recent history, thus corroding their autonomous capacities and enfeebling their national sovereignty.

The Troika's word was law in those countries where its writ ran – Greece, Ireland, Cyprus, and to a more limited extent, Spain. It was answerable only to a trio of unelected organisations, far removed from the consequences of its policies on the lives of citizens. Widespread socio-political reaction to Troikanomics gave shape to the anti-austerity movement across the EU, characterised by the centre as 'Populism'.

This book provides a timely response to the revisionist argument that there is no longer a 'crisis' in Europe. In their innovative analysis, the authors argue that Troikanomics is a manifestation of a deeper existential crisis within the EU that encompasses the centralisation of power, Brexit, Europe's ominous militarisation and the progressive abandonment of its foundational values.

© The Author(s) 2018

Ray Kinsella and Maurice KinsellaTroikanomicshttps://doi.org/10.1007/978-3-319-97070-7_1

Begin Abstract

1. Foundations of the Argument

Ray Kinsella¹ and Maurice Kinsella²

(1)

Michael Smurfit Graduate School of Business (Formerly), Co Dublin, Ireland

(2)

The Galilee House of Studies, Athy, Kildare, Ireland

Ray Kinsella (Corresponding author)

Maurice Kinsella

End Abstract

An Inflection Point in the European Union

Troikanomics (from ‘Troika’, a triumvirate charged with the task of mitigating against the European Banking and Debt Crisis; and ‘nomics’ from the Greek ‘nomos’, meaning ‘law of’). This concept represents the extent to which, in its structural and operational characteristics, the Troika was a ‘law-unto-itself’. It existed outside of established European Union (EU) mandates and was not accountable to the national governments over which it exercised control, nor to their citizens. It is indicative of a deeper undermining of national autonomy within the EU that is iteratively expressing itself in numerous individual existential crises.

The European Banking and Debt Crisis has been an existential milestone in the history of the EU and the Eurozone. Not only has it threatened to upend their obdurately protected status quo, but its consequences have brought their longer-term survival into question. The Troika, and its modus operandi ‘Troikanomics’, has scorched itself into the ongoing narrative of this crisis. It was a rogue form of austerity which, in subjugating member nations’ national autonomy, prefigured something deeper. It is one among the most visible of multiple forms of existential crises that have spread across different domains of the EU. The Troika was a triumvirate established in 2010, from the capabilities of the European Central Bank (ECB), the European Commission (EC), and the International Monetary Fund (IMF). Its purpose was to provide a ‘firewall’ against contagion in highly indebted EU peripheral countries by developing, coordinating, and overseeing a programme of conditional funding to them. Troikanomics expressed itself in the unprecedentedly severe fiscal and structural adjustments that were allied with the provision of this funding—imposed through an economic programme of austerity that was deeply oppressive in its political oversight.¹ This process exacerbated the single greatest sociopolitical and economic dislocation in the EU’s recent history by transposing the primary burden of adjustment onto debtor countries, corroding their autonomous capacities and enfeebling their national sovereignty.²

In 2018 the European Council formally decided to replace the Troika with a new institutional mechanism, the European Monetary Fund—crafted around the European Stability Mechanism.³ This has been designed to provide mutual assistance to EU member nations which have been impacted by external (often asymmetric) ‘shocks’ and are in need of short-term financial assistance. It draws to a close the formal activity of the mechanisms underpinning this highly contentious initiative, but by no means concludes their deeper ramifications—including negative social fallout. What makes this decision all the more substantial is that it overlaps with the formal exit of Greece from its interminable Bailouts, albeit that it remains under ‘enhanced surveillance’ for the foreseeable future.⁴ The demise of the Troika has in fact been evident since 2014, and was one of the key recommendations of the European Parliament’s Report (2014) on its workings—in which they identified multiple failings in the manner in which it had engaged with Greece, Ireland, Portugal, Cyprus, and Spain.⁵

The rapid proliferation of the crisis across the Eurozone increasingly threatened to manifest itself in political contagion (which has largely been pejoratively dismissed as ‘Populism’—belying its deeper existential legitimacy).⁶ This threat, coupled with inadequacies in the architecture of the Eurozone (e.g. a lack of institutional or regulatory fail-safes), meant that the EU’s response to the crisis was primarily ad hoc—with the Troika being a demonstrable example. At the heart of the matter, therefore, is the reality that, like the institutional structure of the Eurozone itself, the substance and mode of the Troika’s engagement with ‘debtor’ countries was not adequately thought through.

The need for emergency financial assistance to support the rebalancing and stabilisation of highly indebted countries became increasingly evident as the crisis unfolded. So too did the aligned need to apply some form of conditionality to financing arrangements—a well-established characteristic of IMF Programmes. Consequently, the real issue was not the principle of conditional funding per se, but rather the manner in which it was implemented. Namely, the scale and scope of this conditionality subverted domestic political governance and catalysed nihilistic economic repression—all the while challenging the democratic legitimacy of both individual member nations and the EU itself. This process, including the imposition of macroeconomic adjustment and ‘reforms’, impelled these countries into a decisive inflection point in their histories by deeply subverting their national autonomy. These events contravened the community-rooted principles of solidarity and subsidiarity that the EU continued to proffer as being indispensable aspirations.

The mind-set and motivations that the EU exemplified in its attempts to resolve the crisis reflected a profound failure to recognise national autonomy’s status as both intrinsic and relational: a capacity possessed by member nations prior to their accession to the EU (expressed in the principle of subsidiarity) and fostered through healthy transnational relationships within the EU (expressed in the principle of solidarity). This is in particular the case within a community such as the EU, where members are bound together in reciprocal relationships through a number of multilateral mechanisms, such as the Economic and Monetary Union (EMU). What the EU was meant to be became increasingly opaque—cast into darkness by the shadow of what it had become. Troikanomics continues to demonstrate the costs, at multiple levels and in multiple arenas, of this discrepancy and the consequences of the EU’s default into a hegemonistic and technocratic orthodoxy.

There have been extensive discussions on what structural and functional form that the Troika’s replacement should take, over and above its foundations in the European Stability Mechanism. More important than the mechanisms through which it operates is the mind-set that it possesses in attempting to carve out a new paradigm for the EU’s intra-community relationships. With the EU now facing into a period of transformational changes (by design, e.g. the 2019 European Elections, and by circumstance, e.g. policy responses to the ongoing Migration Crisis), these kinds of issues, and their deeper existential corollaries, require reflecting upon. The lessons we can glean from the burden of Troikanomics, and the wider existential crisis within which it was embedded, can help to inform us in deciding on the content and character of the path that the EU chooses to adopt as it faces into a new political and administrative regime—a new European Commission—beyond the 2019 European Parliamentary elections. In this regard, the path ahead should use this existential crisis as an opportunity for honest and reflective critique so as to reaffirm its foundational vision and values, and the role it hopes to play within wider geopolitical narratives.

Navigating the Narrative of the Crisis

Reflecting on the ever-proliferating books, reports, and academic studies on the European Banking and Debt Crisis, it is easy to become both fatigued and frustrated. Fatigued at the sheer volume of expert perspectives that have produced compelling analyses on this existential epoch and the legacy it has left both on countries and on individual lives. Frustrated at the difficulties that they have faced in bridging the divide between theoretical inquiry and practical outputs in the political economy. There is no mandate to apply their insights in praxis—either because the EU is unwilling to cast its net for critique, or because it is structurally and functionally ill-equipped to make good on the insights that critiques on this crisis have to offer.

Institutional and descriptive narratives and, of course, political perspectives (read: agendas) all constitute an indispensable corpus of literature for existing and future policy learning, as well as for historical inquiry. However, even here, there is no workable consensus on the dimensions of reform—except that their final form will ultimately revert to the will of the Franco-German centre. To take one example, in 2017, two radically different blueprints for change were published: one which envisages no less than five different possible footpaths (including a return to a basic trading zone), while another makes inroads towards a more fully federalised EU.⁷ These considerations are shaped by shifting electoral pressures regarding what is an acceptable trajectory to propel the EU forward. The lack of clarity or coherence in mapping a path forward is one example of the deeper existential crisis that the EU is currently confronted with. A core problem is that the capacity of the EU establishment to learn from this and aligned crises, and adopt an authentic route towards recovery and reform, is mediated through the ‘Conventional Wisdom’ rather than through a truly responsive critique.

Importantly, many analyses on the crisis have, understandably, grappled with this issue from a purely economic stance. But there is much more to these events than economics, and efforts to fully engage with it through a ‘lone lens’ critique may turn out to be inadequate—in particular with respect to conveying the profound existential significance it has had for people and nations. Indeed, each distinct dimension of the EU’s architecture—whether they be economic, political, or social—throws cross hairs across the others and provides their own contributions to the character of the EU.⁸ For example, the EU has been weighed down in certain countries by deep social pathologies exemplified in compromised health status, homelessness, and unemployment—which have proliferated in tandem with the unfolding consequences of austerity-based policy responses to the economic crisis.⁹

Thus, analysis may benefit from being filtered and refracted through another lens—one that is less willing to casually accept institutional ‘givens’ and, instea...

Table of contents

• Cover
• Front Matter
• 1. Foundations of the Argument
• Part I. Crisis and Catharsis in the Heartland of the European Union
• Part II. Development of the Crisis: Architecture, Agendas and Austerity
• Part III. Autonomy and the EU Experience
• Part IV. Where from Here? Charting the Trajectory of the EU
• Back Matter