EU Auditors Criticize Handling of Greece Bailouts

The EU handling of the Greek debt crisis successfully imposed reforms and avoided a catastrophic default by Greece, but failed in ensuring Athens could stand on its own feet financially, an EU auditor’s report said on Thursday.

“These programs promoted reform and avoided default by Greece. But the country’s ability to finance itself fully on the financial markets remains a challenge,” said Baudilio Tome Muguruza, a member of the European Court of Auditors responsible for the report, AFP reported.

Greece was the recipient of three massive bailouts, handing the sun-kissed Mediterranean country over €350 billion ($410 billion) in rescue loans, beginning in 2010.

The auditors were appraising the job done by the European Commission, the EU’s executive arm, which sat at the table as a member of the notorious “troika” that made sure that Athens delivered on reforms promised in return for the cash.

The troika was made up of the International Monetary Fund and European Central Bank, which was not assessed in the audit because it questioned the auditors’ mandate to do so.

The watchdog acknowledged that the first bailout in 2010 “was designed in a situation of extreme urgency” and that conditions imposed on Athens were initially vague, but improved over time.

Still, the first two bailouts demanded a raft of reforms, but “did not adequately prioritize their relative importance and they were not embedded in a broader strategy for the country,” the report said.

The auditors said that the most successful reforms involved budget cuts and taxation, but that structural reforms to the labor code and banking system showed more mixed results. This was in part because the commission overestimated Greece’s ability to implement reforms “and thus did not adapt the scope and timing accordingly”.

In another criticism, the auditors said that while the EU, IMF and ECB troika was a highly complex arrangement, the EU failed to convey to Greek authorities how they worked together.

The European Commission said it would review the audit’s findings.