Consequences Of Troika

As it has been described in the previous part, the developing countries due to inability to serve their debts were forced to borrow funds from the IMF and the World Bank and accept the severe structural adjustment programs bound to the loans. The same happened to the developed European countries, which were badly hit by the global financial and then by the Eurozone sovereign debt crises in 2008 and 2010 respectively. The debt crisis has shown that the problem of indebtedness is no longer exclusive for developing countries.
An eruption of the US housing bubble led to the outbreak of the global financial crisis in 2008. In order to prevent financial institutions from collapse, many countries encouraged the bank bailout programs, thereby significantly
The Troika consists of three institutions, the European Commission (EC), the International Monetary Fund (IMF) and the European Central Bank (ECB). All together they make a collegial decision regarding terms and conditions of obtaining financial aid by the indebted periphery countries. The Troika was set up when it became obvious that the EU has no instruments to solve the sovereign debt crisis. Instead of following the EU law and democratic procedures, it was announced that the crisis is an emergency situation and the EU needs to apply the existing international mechanisms for coping with it (Oberndorfer, 2015). In other words, it was a fast-track adoption of the same notorious tools that the IMF used in the developing countries. Such exploitation of the democratic process leads to the situation, when “the law becomes an instrument of European governance – of political executives, global economic players and strong interest groups, which, in the state of emergency, create what is needed out of nothingness” (Fischer-Lescano, 2014:
In exchange for the help, they obtained ‘Memoranda of Understanding’ and respective three-year adjustment programs, which should have addressed the main problems of the countries. Therefore, Greece accumulated a €110 billion loan, Ireland and Portugal – €85 and €78 billion loans respectively. However, in July 2011, long before the end of the three-year adjustment program, Greece obtained a new €109 billion loan in a form of financial help from the Troika accompanied with a new program (Seitz et al, 2012: 3; 5-6), although it could have been distinguished that programs did not improve country’s situation. Moreover, nor Greece nor other countries, which were granted rescued loans by the Troika, did not truly receive the money as they were instantly transferred back to creditors in a form of debt repayment (Stiglitz,