Blog Post

A needle in a haystack: key terms in official Troika documents

The term “poverty” is essentially absent from Commission documents, except for Greece, where conditionality became increasingly detailed with time and Commission documents are by far the longest compared to those of other programme countries.

By: and Date: March 19, 2014 Topic: Macroeconomic policy

This blog provides an empirical account of evolving Troika conditionality based on the counting of certain key terms in more than 4000 pages of official financial assistance documents. Fiscal consolidation is clearly the focus of conditionality, but also structural reforms were (more or less) extensively discussed. Privatisations were widely discussed in the programme for Greece and Portugal and, in the former case, this was increasingly the case as the programme progressed. In Ireland, privatisations were not a focus of conditionality. The term “poverty” is essentially absent from Commission documents, except for Greece, where conditionality became increasingly detailed with time and Commission documents are by far the longest compared to those of other programme countries.

Following four months of inquiry, the European Parliament is set to discuss and vote on two resolutions: (i) regarding the Troika and its operations, and (ii) on Troika-inspired reforms and their impact on employment.

The report on the committee’s inquiry into the workings of the Troika, drafted by Othmar Karas (EPP, AT) and Liem Hoang-Ngoc (S&D, FR), criticizes among other things how the Troika took a "one-size fits all" approach, without paying due consideration for differing circumstances in different programme countries. However, due to the detailed nature of conditionality and the copiousness of European Commission documents (without considering the parallel IMF reports), it is very hard to assess whether programmes were broadly framed in different ways, on what issues the attention of the Troika was directed, and how this attention shifted in time, as macroeconomic developments evolved. In Greece alone, the Commission staff produced over 1800 pages, in which it discussed the programme developments and its evolving conditionality.

Figure 1. Number of pages in the adjustment programme documents of the European Commission


Source: Sapir et al. (2014)

In a report we recently wrote for the European Parliament, together with André Sapir and Carlos De Sousa, we produced in-depth tables looking at the major measures requested by the Troika as part of financial assistance conditionality for Greece, Portugal, Ireland, and Cyprus. However, building on techniques extensively used by the political science literature (see for example, Laver, Benoit and Garry; 2003), we also took an innovative approach and looked at the frequency with which certain key words appeared in the programme documents produced and published by DG ECFIN of the Commission. Such a technique, although with severe limitations, allows to grasp trends and have a simplistic – and yet telling – overview of the different programmes’ articulation.

In order to get an idea of where the Troika was focusing its attention, we look at the recurrence of selected terms in Commission documents for the four programme countries. As can be seen in Table 1 below, the term “fiscal” was most used for Cyprus, followed by Portugal (mentioned once per page, on average), while in Greece and Ireland the frequency was almost the same (0.8 times per page). “Privatisation(s)”, on the other hand, received large attention in Greece and almost none in Ireland. Across the board, poverty went largely undiscussed, if not in Greece – where the problem recently became so acute it could not be avoided.

Table 1: Selected terms frequency in Commission programme documents


Note: The term “business” was chosen to cover such expressions as “creating new business opportunities”, “simplified set of business tax accounting rules”, “business environment”, and, creating favourable investment conditions.

Source: Sapir et al. (2014)

Table 2: Word count in Commission programme documents

Source: Sapir et al. (2014)

But how did the extent and focus of conditionality change?

In Pisani-Ferry, Sapir and Wolff (2013), it was reported based on stakeholder interviews that conditionality in Greece became increasingly detailed, as the Troika realised that implementation of conditionality was not working, in part because of the lack of specific guidance to a weak public administration. This is confirmed when taking the number of pages of the Commission programme documents as a proxy for level of detail of conditionality: among the four countries, Greece is the only one to display an unmatched explosion in the page count.

Figure 2: Normalised number of pages of Commission programme documents


Note : t corresponds to the first programme document, t+1 to the first review, and so on.

Source: Sapir et al. (2014)

In Greece a shift in tone between the first and the second adjustment programme, from “austerity”- to “growth”-related terms is visible and made tangible by our technique (see Figure 3). Moreover, increasing attention was devoted to privatisations, corroborating the findings of Pisani-Ferry et al. (2013).

Figure 3: Change in term frequency between the first and the second programme for Greece


Note: the comparison is between the First Adjustment Programme for Greece (European Economy, n61) and the Second Adjustment Programme for Greece (European Economy, n94). The vertical axis indicates how many times more (or less) the term is used per page count in the second programme in comparison with the first.

Source: Sapir et al. (2014)

These trends are confirmed when tracking selected terms across all official programme documents. As shown in Figure 4 (below), whereas the attention devoted to privatization(s) soared through time, and (un)employment was increasingly discussed – especially in the second programme – the focus of fiscal consolidation languished.

Figure 4: Term frequency in Commission programme documents for Greece

Note : Dotted lines represent documents belonging to the Second Adjustment Programme for Greece.

Source: Sapir et al. (2014)

A recent similar shift in tone can be observed in Portugal, where the terms “structural reform(s)” and “fiscal adjustment” took almost a specular path.

Figure 5. Term frequency in Commission programme documents for Portugal


Source: Sapir et al. (2014)

It goes without saying that our empirical approach has several caveats, as it does not account for the position of words within the text, for their exact use within a sentence, and does not test statistically the changes in conditionality focus. The devil, as they say, remains in the details – lost, in this case, in over 4000 pages of official documents.

Republishing and referencing


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint. Anyone is free to republish and/or quote this post without prior consent. Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post.

Read article More by this author
 

Opinion

European governance

Can the EU fiscal rules jump on the green bandwagon?

By and large, setting a new green golden rule would be a useful addition to the existing EU fiscal framework.

By: Guntram B. Wolff Topic: European governance, Green economy, Macroeconomic policy Date: October 22, 2021
Read article
 

Blog Post

European governance

Germany’s post-pandemic current account surplus

The pandemic has increased the net lending position of the German corporate sector. By incentivising private investment, policymakers could trigger a virtuous cycle of increasing wages, decreasing corporate net lending, which would eventually lead to a reduction of the economy-wide current account surplus.

By: Lionel Guetta-Jeanrenaud and Guntram B. Wolff Topic: European governance, Macroeconomic policy Date: October 21, 2021
Read about event
 

Past Event

Past Event

Monetary policy in the time of climate change

How does climate change influence monetary policy in the eurozone? What potential monetary policy measures should be taken up to address climate risks?

Speakers: Cornelia Holthausen, Jean Pisani-Ferry and Guntram B. Wolff Topic: Green economy, Macroeconomic policy Date: October 20, 2021
Read article More by this author
 

Podcast

Podcast

Rethinking fiscal policy

A look at the past, present and future of fiscal policy in the European Union with Chief economist of the European Stability Mechanism, Rolf Strauch.

By: The Sound of Economics Topic: European governance, Macroeconomic policy Date: October 20, 2021
Read about event More on this topic
 

Upcoming Event

Nov
4
14:00

European monetary policy: lessons from the past two decades

This event will feature the presentation of “Monetary Policy in Times of Crisis – A Tale of Two Decades of the European Central Bank."

Speakers: Grégory Claeys and Wolfgang Lemke Topic: Macroeconomic policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article
 

External Publication

European Parliament

Tailoring prudential policy to bank size: the application of proportionality in the US and euro area

In-depth analysis prepared for the European Parliament's Committee on Economic and Monetary Affairs (ECON).

By: Alexander Lehmann and Nicolas Véron Topic: Banking and capital markets, European Parliament, Macroeconomic policy Date: October 14, 2021
Read article More by this author
 

External Publication

Global Economic Resilience: Building Forward Better

A roadmap for systemic economic reform calling for step-change in global economic governance to increase resilience and build forward better from economic shocks, prepared for the G7 Advisory Panel on Economic Resilience.

By: Thomas Wieser Topic: Global economy and trade, Macroeconomic policy Date: October 14, 2021
Read article More on this topic More by this author
 

Opinion

Letter: Declining investment may explain why rates are low

Perhaps an analysis of the causes of the declining investment rate would bring us closer to explaining why real interest rates are so low.

By: Marek Dabrowski Topic: Macroeconomic policy Date: October 1, 2021
Read article More by this author
 

Podcast

Podcast

A green fiscal pact

How can the European Union increase green public investment while consolidating budget deficits?

By: The Sound of Economics Topic: European governance, Macroeconomic policy Date: September 29, 2021
Read article More on this topic More by this author
 

Blog Post

Monetary arithmetic and inflation risk

Between 2007 and 2020, the balance sheets of the European Central Bank, the Bank of Japan, and the Fed have all increased about sevenfold. But inflation stayed low throughout the 2010s. This was possible due to decreasing money velocity and the money multiplier. However, a continuation of asset purchasing programs by central banks involves the risk of higher inflation and fiscal dominance.

By: Marek Dabrowski Topic: Macroeconomic policy Date: September 28, 2021
Read article More on this topic More by this author
 

Opinion

The pandemic’s uncertain impact on productivity

The pandemic has certainly permanently affected our way of working. Whether this is for the better remains to be seen.

By: Maria Demertzis Topic: Macroeconomic policy Date: September 28, 2021
Read about event More on this topic
 

Past Event

Past Event

How to strike the right balance between the three pillars of the pension system?

In this event panelists will discuss the future of European pension schemes.

Speakers: Elsa Fornero, Svend E. Hougaard Jensen and Suvi-Anne Siimes Topic: Macroeconomic policy Date: September 23, 2021
Load more posts