Election articles:
59-626: Greek government debt crisis articles: The Second Economic Adjustment Programme for Greece , usually referred to as the second bailout package or the second memorandum , is a memorandum of understanding on financial assistance to the Hellenic Republic in order to cope with the Greek government-debt crisis . It was signed on 1 March 2012 by the Greek Government under then-prime minister Lucas Papademos on one hand, and on
118-472: A "Task Force for Greece". On the night of 26 to 27 October at the EU summit, the politicians made two important decisions to reduce the risk of a possible contagion to other institutions, notably Cyprus , in the case of a Greek default. The first decision was to require all European banks to achieve 9% capitalization , to make them strong enough to withstand those financial losses that potentially could erupt from
177-481: A "voluntary" haircut (finance) . It was agreed that the net contribution of banks and insurance companies to support Greece would include an additional €37bn in 2014. The planned purchase of Greek bonds from private creditors by the euro rescue fund at their face value will burden the private sector with at least another €12.6bn. It was also announced at the EU summit, a reconstruction plan for Greece in order to promote economic growth. The European Commission established
236-504: A Greek default. The second decision was to leverage the EFSF from €500bn to €1 trillion, as a firewall to protect financial stability in other Eurozone countries with a looming debt crisis. The leverage had previously been criticized from many sides, because it is something taxpayers ultimately risk to pay for, because of the significantly increased risks assumed by the EFSF. Furthermore,
295-637: A broad range of issues relevant to the monetary policy and the financial stability of the eurozone countries. The consequences of the decisions taken by the European Troika resulted in many critics both within the European institutions and at national levels. The European Parliament was excluded from negotiations and therefore decided to establish a special committee of inquiry led by the Austrian centre-right MEP Othmar Karas in order to analyse
354-414: A communiqué calling the debt restructuring deal with its private sector involvement (PSI) a "Restructuring Credit Event" which will trigger payment of credit default swaps . According to Forbes magazine Greece's restructuring represents a default. It is the world's biggest debt restructuring deal, affecting some €206bn of bonds. The creditors are invited to swap their current Greek bonds into new bonds with
413-458: A level of just 150 basis points above the Euribor . The IMF was to provide "a significant contribution" to that loan but was only to decide in the second week of March how much that will be. EU Member States would also pass on to Greece all profits which their central banks made by buying Greek bonds at a debased rate until 2020. Private investors accepted a slightly bigger haircut of 53.5% of
472-538: A loss of up to 75%. When all acceptances had been counted at March 9, and after the Greek parliament subsequently had decided to activate a collective action clause for the bonds covered by Greek law , the overall share of Greek government bonds to face a debt swap had reached 95.7% (equal to €197bn ). The remaining 4.3% of bond holders covered by foreign law and refusing the debt swap (equal to €9 billion ), were given two weeks of extra time to reconsider and voluntarily join
531-413: A maturity of between 11 and 30 years and lower average yields of 3.65% (2% for the first three years, 3% for the next five years, and 4.2% thereafter), thus facilitating a €100bn debt reduction for Greece. Euro-area Member States have pledged to contribute €30bn for private sector participation. In case not enough bondholders agree to a voluntary bond swap, the Greek government threatened to and did introduce
590-572: A non-commercial, non-governmental organization. In international relations, MoUs fall under the broad category of treaties and should be registered in the United Nations treaty collection. In practice and in spite of the United Nations Office of Legal Affairs ' insistence that registration be done to avoid 'secret diplomacy', MoUs are sometimes kept confidential. As a matter of law, the title of MoU does not necessarily mean
649-403: A relationship between departments, agencies or closely held companies. In business , an MoU is typically a legally non-binding agreement between two (or more) parties, outlining terms and details of a mutual understanding or agreement, noting each party's requirements and responsibilities—but without establishing a formal, legally enforceable contract (though an MoU is often a first step towards
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#1732775768489708-539: A retroactive collective action clause to enforce participation. The cash will be handed over after it is clear that private-sector bondholders do indeed join in the haircut, and after Greece gives evidence of the legal framework that it will put in place to implement dozens of "prior actions" - from sacking underproductive tax collectors to passing legislation to liberalise the country's closed professions, tightening rules against bribery and readying at least two large state-controlled companies for sale by June. In return for
767-682: Is a term used to refer to the single decision group created by three entities, the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF). It was formed due to the European debt crisis as an ad hoc authority with a mandate to manage the bailouts of Cyprus, Greece, Ireland and Portugal, in the aftermath of their prospective insolvency caused by
826-622: Is determined by the parties' internal law and depends to a large degree on the subject agreed upon. MoUs that are kept confidential (i.e., not registered with the UN) cannot be enforced before any UN organ, and it may be concluded that no obligations under international law have been created. Although MoUs in the multilateral field are seldom seen, the transnational aviation agreements are actually MoUs. Examples include: Examples from U.S. law include: Examples from international development contexts include: Troika (finance) The Troika
885-579: Is the one where the ECB changes collateral policy and large-scale medium-term liquidity creation to encourage markets to invest in higher-yielding government bonds. Its third and most controversial role is the one where the ECB launches the Securities Market Programme, a kind of shaping programme that targets fiscal adjustment and structural reforms in the fiscal policy of individual member states. The ECB also provides advice and expertise on
944-716: The European Commission within the European Troika was to participate in the Troika negotiations and the periodical supervising exercises on behalf of the Eurozone Member States that provided the loans to the Eurozone (EZ) countries in financial need. This function raised some concerns with the ‘independent’ function of the European Commission within the EU’s political framework. According to article 17 of
1003-658: The European Stability Mechanism (ESM). These financial programmes are concluded outside the European Treaties , and thus outside of the jurisdiction of EU law . However, all EU institutions should act in accordance with the Rule of Law , even when exercising authority outside of the Treaties. A role for the International Monetary Fund (IMF) as a member of the Troika was not considered at
1062-995: The European Union when referring to a triumvirate composed of the Foreign Affairs Minister of the Member State holding the (rotating) Presidency of the Council of Ministers , the Secretary-General of the Council of the European Union (who also held the post of High Representative of the Common Foreign and Security Policy ), and the European Commissioner for External Relations . The "troïka" represented
1121-803: The Master Financial Assistance Facility Agreement (MFFA) between the EFSF, the Hellenic Republic, the Hellenic Financial Stability Fund (HSFS) and the Bank of Greece was ratified by the Hellenic Parliament . Memorandum of understanding A memorandum of understanding ( MoU ) is a type of agreement between two ( bilateral ) or more ( multilateral ) parties. It expresses a convergence of will between
1180-606: The Russian word for a three-horse carriage , but it is also used to describe an informal alliance between three actors. In the context of the Euro crisis , the term ‘Troika’ refers to the cooperation between three actors: the European Commission , the European Central Bank (ECB) and the International Monetary Fund (IMF). The Troika set out the conditions under which financial assistance, or promises of assistance, would be approved to European countries in financial difficulties. When
1239-400: The consortium of the European Commission , the European Central Bank and the International Monetary Fund that provided a bailout to these states since 2010, and the financial measures and government policies that the three institutions have demanded to be implemented in return by Greece and the other nations concerned. Slovenia barely avoided intervention by the Troika in 2013, thanks to
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#17327757684891298-402: The face value of Greek governmental bonds, the equivalent to an overall loss of around 75%. The deal implied that previous Greek bond holders are being given, for €1000 of previous notional, €150 in "PSI payment notes" issued by the EFSF and €315 in "New Greek Bonds" issued by the Hellenic Republic , including a "GDP-linked security". The latter represents a marginal coupon enhancement in case
1357-734: The EU and within the Troika. By acting on behalf of some Member States , the Commission is departing from its independent position. Formally the European Central Bank (ECB) does not participate in the decision-making of the programme, these decisions are taken by the IMF and the Finance ministers of the Member States. The role of the ECB can be divided into three groups: A first aspect is the role of verbal interventions addressed to distressed Member States and financial markets. Its second role
1416-468: The Euro countries agreed on a plan to cut the debt of Greece from today's 160% to 120% of GDP by 2020. As part of that plan, it was proposed that all owners of Greek governmental bonds should "voluntarily" accept a 50% haircut of their bonds (resulting in a debt reduction worth €100bn), and moreover accept interest rates being reduced to only 3.5%. At the time of the summit, this was at first formally accepted by
1475-517: The European Troika can be traced back to the Greek loan package of May 2010 and the EFSF . The work of the three members were distinct: the IMF co-financed the loans for Greece, the ECB focused its competences on the banking system and the Commission worked on economic reforms with the IMF. The "Troika solution" was controversial in the Euro crisis' solution following the Lisbon Treaty, as supranational organizations increased their presence among
1534-608: The European Union in external relations that fell within the scope of the common foreign and security policy (CFSP). With the 2009 ratification of the Lisbon Treaty , the post of Secretary-General of the Council was separated from the post of High Representative for the CFSP, which then assumed the responsibilities of the European Commissioner for External Relations. Since only two of the original posts making up
1593-646: The German EFSF-leverage critics, Fabian Lindner , then likened the austerity pressure Greece was feeling to the attitude the US exercised over Germany in 1931. In that earlier circumstance, the collapse of an Austrian and then a German bank followed, leading to a worsening of the Great Depression, political change and ultimately war. The Troika behind the second bailout package defined three requirements for Greece to comply with in order to receive
1652-549: The Greek growth meets certain conditions. While the market price of the portfolio proposed in the exchange is of the order of 21% of the original face value (15% for the two EFSF PSI notes – 1 and 2 years – and 6% for the New Greek Bonds – 11 to 30 years), the duration of the set of New Greek Bonds is slightly below 10 years. On 9 March 2012 the International Swaps and Derivatives Association (ISDA) issued
1711-452: The IMF advocated for more robust debt relief, the EU insisted on more limited options. The European institutions prioritised the maintenance of cohesion and protection of their own rules. Also, the members of the Troika could not agree upon potential risks of financial spillovers across member states of the EZ. For the European institutions, this was a very sensitive topic; this is why the objective
1770-488: The TEU “ the Commission has to act completely independent in carrying out its responsibilities, and they shall refrain from any action incompatible with their duties or the performance of their tasks .” The fact that the Commission was acting on behalf of the member states in the case of financial assistance programs was far removed from its political role. The question remains as to how the Commission can reconcile its task within
1829-428: The Troika had questionable legal basis at all because it was established as an emergency solution. German politician Norbert Lammert stated that in his view it was incorrect to discuss the lack of democratic legitimacy of the Troika since the adjustment programmes had been approved by the parliaments of Ireland , Portugal , Cyprus and Greece ; however, the parliaments did not know the implications when they approved
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1888-511: The bailout money Greece accepts "an enhanced and permanent presence on the ground" of European monitors. It will also have to service its debts from a special, separate escrow account, depositing sums in advance to meet payments that fall due in the following three months. This operation will be supervised by the Troika . On 3 March 2012, The Institute of International Finance said twelve of its steering committee would swap their bonds and accept
1947-507: The conclusion that austerity policies in Greece were more harsh than in Ireland, emphasising political and socio-economic consequences, specifically unemployment, emigration, and deterioration of citizens' physical and mental health. Other critics of the Troika are Yanis Varoufakis , a former Greek finance minister, German writer Fritz R. Glunk, and Noam Chomsky . This term was used in
2006-471: The crisis. With a deteriorating social situation and weak domestic production, growth of Greek debt overtook the GDP rate. For the creditor countries, one of the most important conditions for the bailout was the liberalisation of production and the labour market in Greece. Reforms taken in a context of fiscal austerity can have negative effects without short-term improvement. The term ‘ troika ’ has its origins in
2065-472: The determination of the legal status of a document in the landmark case of Qatar v. Bahrain , 1 July 1994. One advantage of MoUs over more formal instruments is that, because obligations under international law may be avoided, they can often be put into effect without requiring legislative approval. Hence, MoUs are often used to modify and adapt existing treaties, in which case these MoUs have factual treaty status. The decision concerning ratification, however,
2124-562: The development of a formal contract). In the United Kingdom , the term MoU is commonly used to refer to an agreement between parts of The Crown . The term is often used in the context of devolution , for example the 1999 concordat between the central Department for Environment, Food and Rural Affairs and the Scottish Environment Directorate . MoUs can also be used between a government agency and
2183-460: The document is binding or not binding under international law . To determine whether a particular MoU is meant to be a legally binding document (i.e., a treaty), one needs to examine the parties’ intent as well as the signatories' position (e.g., Minister of Foreign Affairs vs. Minister of Environment). A careful analysis of the wording will also clarify the exact nature of the document. The International Court of Justice has provided some insight into
2242-638: The eurozone with financial problems from being supported by other stakeholders, like the European Central Bank, European Union institutions or other Eurozone countries within the Monetary Union . Therefore, the competences of the Troika originated in a statement taken by the Heads of State and Government of the EU member states to establish a joint programme and to provide conditional bilateral loans to Greece . The Troika falls outside
2301-598: The fact that "if nothing had been done for Greece, the impact of the crisis would have been undeniably worse for this country". As it turned out, the Troika underestimated the impact of austerity policies on economic growth. Another problem was in the different philosophies in relation to economic policy across the EC , the ECB and the IMF according to the European Commissioner in charge of economic and monetary affairs Olli Rehn . Whereas
2360-430: The first effects of the crisis emerged in Greece, the IMF was kept at a distance. The EU saw this as an internal matter and wanted to resolve it internally, yet the IMF was pulled in eventually. It was seen as a reliable, neutral organisation that had expertise in helping highly indebted countries. The IMF was responsible, together with the finance ministers, for the decision-making in the financial programmes. The role of
2419-556: The government banks in Europe. The task to negotiate a final deal, also including the private creditors, was handed over to the Greek politicians. In view of the uncertainty of the domestic political development in Greece, the first disbursement was suspended after Prime Minister George Papandreou announced on 1 November 2011 that he wanted to hold a referendum on the decisions of the Euro summit. After two days of intense pressure, particularly from Germany and France, he finally gave up on
Second Economic Adjustment Programme for Greece - Misplaced Pages Continue
2478-439: The idea. On 11 November 2011 he was succeeded as prime minister by Loukas Papademos , who was to lead a new transitional government. The most important task of this interim government was to finalize the "haircut deal" for Greek governmental bonds and pass a new austerity package, to comply with the Troika requirements for receiving the second bailout loan worth €130bn (enhanced from the previously offered amount at €109bn). One of
2537-438: The institutional landscape of the European Union. At this time, the EU was more technocratic and emphasised the controlling aspect of the Troika mechanism. During the crisis period, Germany played a dominant role and took power to rebalance its national interests. The European strategy was implemented with the goal of reducing the Greek fiscal deficit from 15% to 5%. In 2015, the GDP of Greece remained stagnant compared to 2009, and
2596-461: The level of the Troika's accountability. According to the findings of the committee, the Troika's members had highly asymmetric distribution of responsibilities. In addition, differing mandates together with varying negotiation and decision-making structures only led to more divisions and made it difficult to find a common approach. The British MEP Sharon Bowles observed that the response to the crisis lacked transparency and even credibility. In fact,
2655-492: The limitations of the First Greek bailout package . The second bailout package would take the form of an €110bn aid package provided by the newly created European Financial Stability Facility . The repayment period was extended from seven to 15 years and the interest rate was lowered to 3.5%. For the first time, this also included a Private Sector Involvement (called a PSI), meaning that the private financial sector accepted
2714-404: The loan of EUR 1.5 billion from PIMCO . These institutions had wide influence and increased their power over time. They implemented a strong austerity program for the adjustment of Greek fiscal measures. The political impact of the austerity imposed on countries of the EU periphery, which were confronted with significant debt, led to "a predominant economic and social dislocation". The origin of
2773-598: The loans appeared to be insufficient to achieve the fiscal goals fixed by the Troika: 90% of the amount paid interest. For Cyprus, Greece (thrice), Ireland and Portugal, the European Commission, the ECB and the IMF agreed on Memoranda of Understanding with the relevant governments in a three-year financial aid programme on the condition of far-reaching austerity measures to be imposed on their societies in order to cut government expenditure . For details in each case, see Social benefits and wages could not be sustained due to
2832-413: The money. The first requirement was to finalize an agreement whereby all private holders of governmental bonds would accept a 50% haircut with yields reduced to 3.5%, thus facilitating a €100bn debt reduction for Greece. The second requirement was that Greece needed to implement another demanding austerity package in order to bring its budget deficit into sustainable territory. The third and final requirement
2891-581: The other hand by the European Commission on behalf of the Eurogroup , the European Central Bank (ECB) and the International Monetary Fund (IMF). The second bailout package expired on 30 June 2015. It was superseded by the Third Economic Adjustment Programme for Greece . On 21 July 2011, 17 leaders of Euro countries, meeting at an EU summit, approved a preliminary draft of a second bailout package for Greece to address
2950-410: The parties, indicating an intended common line of action. It is often used either in cases where parties do not imply a legal commitment or in situations where the parties cannot create a legally enforceable agreement. It is a more formal alternative to a gentlemen's agreement . Whether a document constitutes a binding contract depends only on the presence or absence of well-defined legal elements in
3009-476: The programmes. The Troika interventions generated long-lasting political damage not only for the European Union but also for the member states themselves. Many European citizens claimed that the budget cuts resulted in the EZ's longest recession since the creation of the Euro single currency in 1999. During that period, the efficiency of the Troika was another cause of concern but the ECB president Jean-Claude Trichet tried to reassure people and highlighted
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#17327757684893068-648: The scope of European law . The Troika can be considered as a working group in charge of negotiating financial assistance programmes with indebted Eurozone countries. Apart from that, it also carries out evaluations of the implementation level of the programme. The financial assistance in itself is provided by special mechanisms, such as the European Financial Stability Facility (EFSF), the European Financial Stabilisation Mechanism (EFSM) and
3127-434: The swap. When the swap is executed, the bond holders will receive a cash payment on 15% of their original holding, and become issued with new Greek bonds worth 31.5% of their old bonds (covered by 24 new securities). Combined this will result in a 53.5% haircut of the face value, so that the Greek debt pile overall will decrease from its current level at €350bn , to a more sustainable level around €250bn . On 20 March 2012,
3186-523: The text proper of the document (the so-called " four corners "). The required elements are offer and acceptance , consideration , and the intention to be legally bound ( animus contrahendi ). In the US, the specifics can differ slightly depending on whether the contract is for goods (falls under the Uniform Commercial Code ) or services (falls under the common law of the state). Many companies and government agencies use MoUs to define
3245-568: The three organisations offered assistance, the necessary measures and reforms were imposed in the form of a Memorandum of Understanding between the Troika and the Member States concerned. The legal basis for the action taken by the Commission and the ECB is considered debatable. The creation of this mechanism was due to a political and legal gap in the Treaty of Maastricht . Article 125 TFEU together with article 123 TFEU prevents countries of
3304-493: The time. Firstly, this organisation is an 'outsider'; it is not an institution of the European Union . A second objection was that relying on the IMF's help was an admission of failure of the Eurozone, and a dent in confidence in the euro . In the months leading up to the euro crisis, the IMF already had concerns that countries in the European periphery would be a potential threat to the other major financial markets in Europe via their commercial banks’ balance sheet exposures. When
3363-491: The world financial crisis of 2007–2008 . Earlier, "troika" had been used as the designation of a triumvirate that represented the European Union in its foreign relations, in particular concerning its common foreign and security policy (CFSP), until the Treaty of Lisbon was ratified in 2009. The term Troika has been widely used in Greece , Cyprus ( Greek : τρόικα ), Ireland , Portugal , and Spain to refer to
3422-522: Was that a majority of the Greek politicians should sign an agreement guaranteeing their continued support for the new austerity package, even after the elections in April 2012. On 21 February 2012, the Eurogroup finalized the second bailout package. In a thirteen-hour marathon meeting in Brussels, EU Member States agreed to a new €100 billion loan and a retroactive lowering of the bailout interest rates to
3481-477: Was to avoid debt restructuring . If the Troika had paid more attention to cross-country spillovers and deteriorating conditions, the consequences could have been less harmful. The academic community criticised the Troika, accusing it of having immense power and pursuing an approach of fiscal conservatism . Scholars such as Kevin Featherstone, Judith Clifton, Daniel Diaz-Fuentes and Ana Lara Gómez came to
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