Following the 2008 Credit Crisis and subsequent bail-out programs that were meant to not only save insolvent European banks, but also insolvent sovereign governments, the entity that would become known as the Troika emerged as one of the most powerful organizations in the Eurozone.
The Troika not only had support from most of the biggest economies in Europe (France and Germany), but the relationships between the triumvirate of the IMF, European Commission, European Central Bank with Germany’s dynamic duo of Chancellor Merkel and Finance Minister Schäuble, gave the un-elected financial body unprecedented power that allowed them to force austerity on some EU nations, and even insert technocrats in positions of leadership into a few others.
But in today’s fast paced world, economic changes are no longer measured in terms of decades, but instead in just years or even months. And this means as well that support given to an institution in the past can quickly cease when their policies become detrimental to the very peoples that had provided them the authority to engineer an agenda that before was in that nations best interest.
Within the span of a week, two legs of the Troika were revealed to have been planning subversive agendas that are completely shattering confidence in their authority, and in their capacity to function as the primary arbiters of monetary policy. On April 2 Wikileaks revealed a transcript between two high level IMF officials where they were discussing the option of purposefully creating a credit event in Greece as a means to coerce them back to the bargaining table in the hopes that the Southern Eurozone nation would institute even greater austerity measures in exchange for more bailout money.
Not surprisingly, IMF head Christine Lagarde was quick to deny this once the leaks were disclosed, but the cat was out of the bag and Prime Minister Tsipris believes he can no longer trust the international bank to look out for Greek interests in future negotiations.
However, there is perhaps an even more important event that is now in play, and it involves Mario Draghi and the European Central Bank’s (ECB) plans for expanding Quantitative Easing to the next level. On April 8, the German publication Spiegel dropped a bombshell when it published news that the long-standing honeymoon between Germany and the ECB may now be over, and that the ministry of finance is fully prepared to take the central bank to court should Draghi decide to move forward with a monetary policy of direct payments to individuals in a new phase of QE.
Europe is at the end of a crossroads, and on the cusp of seeing the grand continental experiment of a solidified Union shatter into a thousand pieces. And what began in Iceland back in 2009 when the people stood firm and rejected Troika mandates for debt paybacks has accelerated in the past couple of years to places like Spain, Greece, Italy, and even Britain, where populist movements have helped put political figures in place that are dedicated towards ending their nation’s ties to the Union. And all that remains is for the largest economies to see the writing on the wall, and it looks like events this week have made that scenario one major step closer.