Explainer: Evaluation of Financial Assistance to Greece
Why is it important to have an evaluation of ESM’s financial assistance?
This follows best practice of other international financial institutions, such as the European Investment Bank, the International Monetary Fund and the World Bank, who also frequently evaluate their activities to promote accountability and learning, and thereby also the credibility and public trust in the institutions.
Drawing lessons from financial assistance provided by the European Financial Stability Facility (EFSF) and ESM will help to improve the effectiveness of programme activities and support the ESM in addressing future crises.
It is also in line with a broader commitment to transparency that supports the accountability of the institution. The ESM has a number of dedicated transparency initiatives for programme-related decision-making to ensure that all stakeholders and the general public have a clear understanding of the ESM mandate and its work.
What is the objective of the evaluation?
The evaluation aims to assess the financial assistance to Greece, against evaluation criteria such as relevance, effectiveness, and cooperation and coordination.
In 2016, the Chairperson of ESM Board of Governors appointed former ECB Executive Board member Gertrude Tumpel-Gugerell to conduct an independent evaluation of past EFSF and ESM financial assistance. The report focused on all five euro area countries that received stability support: Ireland, Portugal, Spain, Cyprus, and the EFSF Greek programme up to its initial expiry in December 2014.
The first report concluded that the Greek programmes would require further evaluation as the ESM Greek programme was still ongoing during the evaluation exercise. This is a recommendation that the Board of Governors supported in its statement of 15 June 2017. In this sense, Governors committed to further enhancing the effectiveness and efficiency of the ESM, as well as the resilience of the euro area.
Following the end of the third programme for Greece on 20 August 2018, work on this evaluation exercise can now start.
Who will conduct this evaluation?
To ensure credibility, evaluations require a high degree of independence. The Chairperson of ESM Board of Governors appointed Joaquín Almunia to evaluate the financial assistance to Greece. The responsibility for the main findings and recommendations lies with Mr. Almunia.
To ensure impartiality, Mr Almunia is tasked to work free from influence, supporting a coherent process and evidence-based conclusions.
Before finalising the report, Mr. Almunia will consult with ESM Directors and partner institutions on his findings and draft recommendations. During the exercise, he will benefit from advice and support from senior evaluation experts with extensive evaluation experience at other international financial institutions, strengthening further the technical soundness and independence of the exercise.
How will the exercise be conducted?
Mr Almunia will now initiate the work on defining the scope and evaluation questions for this exercise.
The final proposal for the terms of reference of the evaluation will be submitted to the ESM Board of Governors for consideration and approval during the Annual Meeting on 13 June 2019 in Luxembourg.
Following approval, the evaluation will be carried out in the second half of 2019 and the beginning of 2020. The aim is to present its findings and recommendations to the Board of Governors at the June 2020 Annual Meeting.
How does the ESM implement the evaluator’s recommendations?
By initiating this process, the ESM Board of Governors shows its commitment to the evaluation and considers its findings and recommendations an important input to promoting learning and transparency, which in turn enhance the credibility of the institution. It is a general practice among international financial institutions to consider the evaluation recommendations and progress made in their implementation periodically, although the governing bodies are not under a strict obligation to implement all of them.
When discussing the first evaluation report, Governors considered that the recommendations raised important issues and noted that ensuring adequate follow-up to the evaluation report would ensure that best practices are systematically applied.
To give an example, in order to address the previous independent evaluator’s recommendation on transparency and evaluability, the ESM is currently working on a public database for its website. The programme database will provide macroeconomic and financial indicators, including projections, programme conditionality clauses and their reviews, as well as relevant lending data.