Slovakia ready to vote down euro bailout fund
It has been a member of the eurozone for less than three years and is one of its poorest, smallest members. Yet unassuming Slovakia looked poised tonight to torpedo the bill to boost the powers and size of the multibillion-euro bailout fund designed to rescue Greece and other indebted countries.
The prospect of a no vote unsettled the markets all day and prompted the European Central Bank head Jean-Claude Trichet to warn that political deadlock "threatens financial stability in the EU as a whole and adversely impacts the real economy in Europe and beyond".
A rejection of the bill is also expected to bring about the collapse of the fragile four-party coalition that has been ruling Slovakia since June last year.
Each of the other 16 states using the common currency have already voted through plans to expand the powers of the European financial stability facility (EFSF), allowing it to lend €440bn (£385bn). But little Slovakia, with a population of just 5.5 million and a GDP representing approximately 0.5% of the total EU economy, appeared ready to reject the vote.
As well as having more firepower at its disposal, the fund would be able to lend quickly to banks and governments and buy up the bonds of troubled countries in the markets. . Slovakia is being asked to guarantee EFSF loans worth €7.7bn.
Without the nod from Slovakia, the backstop fund cannot act proactively, further complicating the eurozone's efforts to deal with a crisis that has already seen three countries get bailouts and raised fears of a Greek default and massive losses for banks.
After hours of testy debate in Bratislava's National Council parliament, it looked increasingly likely that the prime minister, Iveta Radicova, a 54-year-old professor of sociology who took power last year, would fail to get the majority needed to pass the bill.
Although three of the parties in her fractious coalition were ready to vote for the measure, the fourth, the economically liberal Freedom and Solidarity (SaS), announced it would stage a walk-out before the vote. Without the votes of those 22 MPs the 77-member governing coalition has no chance of a majority in the 150-seat parliament. The opposition Smer party had announced it would abstain from the vote.
The SaS boycott was prompted by Radicova's decision on Tuesday morning to link the EFSF vote with a confidence vote on her leadership. If, as expected, the parliament were to vote against, Radicova accepted she would resign and the government collapse.
Martin Poliacik, a 31-year-old, sharp-suited, intricately bearded SaS MP, said his party was boycotting the vote "because it's not possible to vote yes and no with one button". He and his colleagues wanted to vote against expanding the EFSF but in favour of the government, he said.
Poliacik said SaS's oppositon to the bill could be summed up very simply: "Debts should not be solved with new debts." It was unfair, he said, that Greece could flout the rules when Slovakia had to follow them slavishly when applying to join the euro. "In order to get into the eurozone, they [the European Council] were very, very strict, making us fulfil every criterion on a spreadsheet to meet the Maastricht treaty requirements. So why should we pay for the Greeks if they are incapable of making reforms?"
Speaking in the debating chamber, Richard Sulik, the attention-grabbing leader of parliament and head of the SaS, claimed Slovakia has the lowest average salaries in the eurozone at €762 a month (£667) and the country was paying more than its fair share. "Slovakia will have to pay the biggest price for the fund expansion," he said.
Many ordinary Slovaks have little patience with helping much wealthier countries that lacked the discipline to follow eurozone rules.
Mariana Kocisikova, 40, a shop assistant in the Dr Feelgood cosmetic store in Bratislava's old town, said it was unclear to her what the Greeks had done with the first tranche of bailout money. "I think the Greeks need to learn to work harder and appreciate that they are going to have to sacrifice something in return for our help," she said. But like many Slovaks she believed the parliament had a duty to vote through the EFSF expansion. "Perhaps one day we could be in the same situation as the Greeks and need help."
MPs spoke passionately in support of the bill, some invoking the ghosts of Slovakia's communist past to tug at the consciences of the rebels. Christian democrat Martin Fronc asked SaS if they wanted to go back to the Cold War years of isolation "when everybody nodded his head pretending they were living a good life". Ivan Miklos, the finance minister, warned: "The image and reputation of Slovakia has been damaged." He added: "I want Slovakia to be known for success and economic development, not for being an unreliable partner for the EU who is willing to share Europe's success but not help solve its problems."
In a dig at SaS's stubbornly liberal economic position, Pavol Hrusovsky, an MP from the Christian Democratic Movement (KDH) party said: "In real life not everything is about mathematics, but it's also about relationships, including international relationships."
It is not the first time Slovakia has been against major eurozone policies since it adopted the currency in 2009. Last year, it rejected providing its €800m share of the €110bn EU bailout plan for Greece. That rescue went ahead without Slovakia, but another exemption for the country would cast doubt over the eurozone's credibility and ability to function as a bloc.
Nonetheless, many analysts are surprised at the power the small country wields.
As Greg Anderson of Citigroup put it: "It seems somewhat unfathomable that a country that has not been a member of EMU for even three years could be the one leading to its unravelling."
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The prospect of a no vote unsettled the markets all day and prompted the European Central Bank head Jean-Claude Trichet to warn that political deadlock "threatens financial stability in the EU as a whole and adversely impacts the real economy in Europe and beyond".
A rejection of the bill is also expected to bring about the collapse of the fragile four-party coalition that has been ruling Slovakia since June last year.
Each of the other 16 states using the common currency have already voted through plans to expand the powers of the European financial stability facility (EFSF), allowing it to lend €440bn (£385bn). But little Slovakia, with a population of just 5.5 million and a GDP representing approximately 0.5% of the total EU economy, appeared ready to reject the vote.
As well as having more firepower at its disposal, the fund would be able to lend quickly to banks and governments and buy up the bonds of troubled countries in the markets. . Slovakia is being asked to guarantee EFSF loans worth €7.7bn.
Without the nod from Slovakia, the backstop fund cannot act proactively, further complicating the eurozone's efforts to deal with a crisis that has already seen three countries get bailouts and raised fears of a Greek default and massive losses for banks.
After hours of testy debate in Bratislava's National Council parliament, it looked increasingly likely that the prime minister, Iveta Radicova, a 54-year-old professor of sociology who took power last year, would fail to get the majority needed to pass the bill.
Although three of the parties in her fractious coalition were ready to vote for the measure, the fourth, the economically liberal Freedom and Solidarity (SaS), announced it would stage a walk-out before the vote. Without the votes of those 22 MPs the 77-member governing coalition has no chance of a majority in the 150-seat parliament. The opposition Smer party had announced it would abstain from the vote.
The SaS boycott was prompted by Radicova's decision on Tuesday morning to link the EFSF vote with a confidence vote on her leadership. If, as expected, the parliament were to vote against, Radicova accepted she would resign and the government collapse.
Martin Poliacik, a 31-year-old, sharp-suited, intricately bearded SaS MP, said his party was boycotting the vote "because it's not possible to vote yes and no with one button". He and his colleagues wanted to vote against expanding the EFSF but in favour of the government, he said.
Poliacik said SaS's oppositon to the bill could be summed up very simply: "Debts should not be solved with new debts." It was unfair, he said, that Greece could flout the rules when Slovakia had to follow them slavishly when applying to join the euro. "In order to get into the eurozone, they [the European Council] were very, very strict, making us fulfil every criterion on a spreadsheet to meet the Maastricht treaty requirements. So why should we pay for the Greeks if they are incapable of making reforms?"
Speaking in the debating chamber, Richard Sulik, the attention-grabbing leader of parliament and head of the SaS, claimed Slovakia has the lowest average salaries in the eurozone at €762 a month (£667) and the country was paying more than its fair share. "Slovakia will have to pay the biggest price for the fund expansion," he said.
Many ordinary Slovaks have little patience with helping much wealthier countries that lacked the discipline to follow eurozone rules.
Mariana Kocisikova, 40, a shop assistant in the Dr Feelgood cosmetic store in Bratislava's old town, said it was unclear to her what the Greeks had done with the first tranche of bailout money. "I think the Greeks need to learn to work harder and appreciate that they are going to have to sacrifice something in return for our help," she said. But like many Slovaks she believed the parliament had a duty to vote through the EFSF expansion. "Perhaps one day we could be in the same situation as the Greeks and need help."
MPs spoke passionately in support of the bill, some invoking the ghosts of Slovakia's communist past to tug at the consciences of the rebels. Christian democrat Martin Fronc asked SaS if they wanted to go back to the Cold War years of isolation "when everybody nodded his head pretending they were living a good life". Ivan Miklos, the finance minister, warned: "The image and reputation of Slovakia has been damaged." He added: "I want Slovakia to be known for success and economic development, not for being an unreliable partner for the EU who is willing to share Europe's success but not help solve its problems."
In a dig at SaS's stubbornly liberal economic position, Pavol Hrusovsky, an MP from the Christian Democratic Movement (KDH) party said: "In real life not everything is about mathematics, but it's also about relationships, including international relationships."
It is not the first time Slovakia has been against major eurozone policies since it adopted the currency in 2009. Last year, it rejected providing its €800m share of the €110bn EU bailout plan for Greece. That rescue went ahead without Slovakia, but another exemption for the country would cast doubt over the eurozone's credibility and ability to function as a bloc.
Nonetheless, many analysts are surprised at the power the small country wields.
As Greg Anderson of Citigroup put it: "It seems somewhat unfathomable that a country that has not been a member of EMU for even three years could be the one leading to its unravelling."
Source