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The Troika -- Intensive Care for Countries


Three Eurozone countries are currently in an intensive care program labeled Troika, a synonym of the three international lenders that saved the countries from bankruptcy. In medicine, intensive care means that a sick person needs life support assisting the body with oxygen, intravenous infusions and the like. In economics, the Troika stands for a program which provides life support to the economy of a country which without would succumb to its ailments.

The basic idea is that the country temporarily sacrifices much of its sovereignty in exchange for this bailout. This arrangement may work or may not. Ireland seems a good candidate for an early comeback: it hopes to shed the shackles of the Troika by mid-2015 and return with its credit needs to the money markets. Portugal received praise for its reform efforts and succeeded already in May 2014 to borrow some funds in the international market. The Troika finished its work.

The Greek government sounds very upbeat every time its statistics office publishes a positive sounding figure. However, the Troika experts are less happy with Greece's efforts and expect the country to require a third bailout program in early 2015 to the tune of a "low double digit" number of billions of euros. Cyprus is still in deep internal trouble over the reforms imposed by the Troika, with no end in sight.

Thus far, none of the countries has started actually repaying the Troika loans. The first public creditor expecting to collect interest and principal payments is the International Monetary Fund which is forced by law to cut off any country that falls behind in servicing IMF loans. Needless to say. some debtor governments will try to stretch their obligations and those of their electorate to the maximum. Greece, for instance, passed a law envisaging a time horizon of one hundred years for repayment of citizens' tax debts.

At this point the question arises how temporary Troika interventions can be. The Greek government, for instance receives the Troika's benefits while making every conceivable effort to wriggle out of its control. Of course it is embarrassing for any government to be under "commissariamento", as the Italians call it. Of course the government will try hard to maintain an image of sovereignty to avoid losing all credibility among its citizens. But the behavior of the Greek government suggests that the old style politics will return instantly the moment the Troika ceases to keep a close watch over all activities of the public administration.

Entering intensive care usually means a one way road for the terminallv ill. There is no guarantee that all countries currently enjoying Troika life support will some day bounce back to normalcy. This appears more of a psychological than an economic problem. Ireland and Portugal have understood the lesson the Troika was forced to teach them. Greece does not seem to have listened.

The Greek electorate in its majority rejects the reform program and the government which collaborates -- although unwillingly -- with the Troika. Elections are looming for 2015 and the current favorite is SYRIZA, a socialist party which promises to undo the reforms and to renege on the public debt. Apparently many Greeks, including members of parliament and government, seem to believe that the Eurozone countries will always bail out Greece no matter what happens. Since the Troika's reforms only punish the poor, not harming politicians, shipping tycoons and a broad spectrum of wheeler-dealers, the latter see no need to put their house in order like the Portuguese and the Spaniards did.

Without Troika surveillance, Greece would slide back to its traditional mixture of corruption, carelessness and bureaucratic inefficiency. The present type of government would guarantee a quick return to the old days.  Greece therefore calls for the Troika's rule to change from temporary to permanent. Without external guidance Greece does not seem able to participate in a complex Western style system of economy and governance. The choice for Athens is either to accept long term limited sovereignty or to leave the Eurozone for good. This is the choice SYRIZA will face if it wins the next elections.

In a European perspective, the Greek problem looks rather small, and the Cypriot one even smaller. But behind the Hellenic twins appear the contours of a monster, huge and menacing: Italy. Everything said about Greece applies to Italy, as well. Only the scale of problems changes. It is true that Italy has never explicitly appealed for assistance. No Troika delegation has ever visited Rome. Yet, Italy today is Europe's basket case.

Still, the economy is arguably not Italy's worst problem. Its main handicap is, like in Greece, the pervasive unwillingness of the population and its leadership to accept and implement reforms. In contrast to Greece, Italy can boast a reform minded government which struggles to get some measure of progress accepted: A kind of Troika program without the Troika: efforts which appear heroic and ridiculous at the same time.

Current Premier Matteo Renzi blames the past two decades of neglect and laissez-faire for the recession and backwardness immobilizing his country. But it is wrong to blame only the Berlusconi years, Italy's menefreghismo, Italians' disdain for anything but one's own personal well-being and advantage, has been groomed in decades of corrupt Christian Democrat rule before Berlusconi appeared on the scene.

Italians are of course partly aware of what is wrong in their country and society. Many among them even blame themselves for the uncomfortable situation they are in. But when the government threatens to make this situation still more uncomfortable they are up in arms. Italy's economy largely rests on the principle of tax cheating. In Naples, for instance, 85 percent of small commercial enterprises cheat on value-added tax. If the state really tried to collect all taxes, Italy's economy would fold up.

With organized crime being probably the largest and most successful employer in the country, the tax-free black sector of the economy has become huge and keeps the country afloat. When the official economy shrinks, the invisible one expands. Millions manage life by moonlighting, especially those laid off.

For a government attempting to implement a Troika program without the Troika in a country paralyzed by a "not in my backyard" attitude borders on suicide. With all due respect for Matteo Renzi, Brussels, Washington and Frankfurt should draw up a detailed Troika program for Italy to be ready to intervene when the ruling political caste "Palazzo" has got rid of him. And like in the case of Greece, the donors should be aware that a Troika rule over Italy. a commissariamento, is not likely to be of a temporary nature.


Benedikt Brenner

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