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Rehn defends crisis response before MEPs

Countries must shoulder blame for shortcomings of bailout programmes.

Olli Rehn, the European Commissioner for economic and financial affairs, tonight (13 January) staunchly defended the European Union’s response to the sovereign debt crisis in the face of sometimes angry questions from MEPs.

If Greece’s bailout and austerity programmes fared worse than expected, it was due to “political turbulence” and not to forecasting errors by the European Commission, argued Rehn.

Cyprus’ bailout programme would have been less severe had it heeded suggestions from the Commission to seek an EU bailout rather than “doping” itself with a loan from Russia, he continued.

Rehn repeatedly insisted that national governments in receipt of a bailout were “ultimately responsible” for the austerity measures attached to the assistance. Where governments assumed “ownership” of the measures, such as in Ireland, Portugal, Spain and Slovenia, the bailout programmes worked, he added.    

Rehn was appearing before MEPs on the European Parliament’s committee for economic and monetary affairs, which is conducting an enquiry into the so-called Troika, an ad hoc group of officials from the International Monetary Fund, the European Commission and the European Central Bank.

The Troika is charged with ensuring that national governments implement the austerity measures that they agree to in exchange of receiving bailout funds.

MEPs will present a draft report on the Troika on Thursday (16 January).

Rehn recognised that the Commission’s forecasts were not always correct, but said this merely showed “the limits of economics”.

He also admitted that the three international lenders did not always see eye to eye, observing that the Commission was in favour of granting Cyprus more gentle bailout terms.

Cypriot savers were eventually forced to take a loss on savings over €100,000.

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