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IV ECA found that the European Commission estimated the countries’ public budgets to be stronger than they actually turned out to be. An important weakness of the Commission’s assessments prior to 2009 was the lack of reporting on the build-up of contingent publicsector liabilities, which often became real liabilities during the crisis. Nor did the Commission pay sufficient attention to the link between large foreign financial flows, the health status of the banks and, ultimately, government finances.
V Reforms to the Stability and Growth Pact in 2011, 2013 and 2014 sought to address the weaknesses of the pre-crisis period by introducing greater macroeconomic surveillance. However, back in 2008 the Commission found itself unprepared to manage the financial assistance when countries started presenting their requests. [...]
IX The assistance programmes were mostly soundly based, given the prevailing EU-level policies and the economic knowledge at that time. But a common weakness of the Commission process was the lack of documentation. It was not geared towards going back in time to evaluate the decisions taken. We could not validate some of the essential information that was forwarded to the Council, such as the initial estimates of the financing gap for some programmes. [...]
XII We found several examples of countries not being treated in the same way in a comparable situation. The conditions for assistance were managed differently in each programme. In some programmes they were less stringent overall, which made compliance easier. When comparing countries with similar structural weaknesses, it was found that the required reforms were not always in proportion to the problems faced or that they pursued widely different paths. Some, but not all, countries’ deficit targets were relaxed more than the economic situation would appear to justify. [...]
XVIII The programmes were successful in prompting reforms. Countries mostly continued with the reforms that were sparked by the programme conditions. Reversals of the reforms were rare at the time of our audit. They were offset by alternative reforms, which were often not equivalent in terms of potential impact.
XIX In four of the five countries, the current account adjusted faster than expected. This is largely explained by the unexpected improvement in income balance, and to a lesser extent by the unexpected improvement in trade balance.
ECA recommendations
(a) The Commission should establish an institutionwide framework allowing the rapid mobilisation of the Commission’s staff and expertise if a financial assistance programme emerges. The Commission should also develop procedures in the context of the ‘two-pack’ regulations.
(b) The forecasting process should be subject to more systematic quality control.
(c) To ensure the factors underlying programme decisions are internally transparent, the Commission should enhance record-keeping and pay attention to it during quality reviews.
(d) The Commission should ensure that proper procedures are in place for the quality review of programme management and of the content of programme documents.
(e) For budget monitoring purposes, the Commission should include, in memoranda of understanding, variables that it can collect with short time lags.
(f) The Commission should distinguish conditions by importance and target the truly important reforms.
(g) For any future programmes, the Commission should attempt to formalise interinstitutional cooperation with other programme partners.
(h) The debt management process should be more transparent.
(i) The Commission should further analyse the key aspects of the countries’ adjustment.