Slovakia Rejects Eurozone Bailout
Slovakia seems to be determined to make a point about the Eurozone bailout, and it’s unclear what the consequences will be:
WARSAW — Europe’s efforts to stem the sovereign debt crisis suffered an embarrassing and potentially costly setback on Tuesday night when the Slovak Parliament failed to approve the expansion of the euro rescue fund, a development that appeared likely to bring down the government but not to derail the measure.
In a vote of 55 for, nine against and 60 abstaining, the Slovak governing coalition failed to muster the necessary votes to pass the plan that would have required them to contribute roughly $10 billion in debt guarantees.
But the country’s leading opposition party said it would be willing to discuss support for the fund after the government fell, pointing to eventual approval of the deal. Officials in Brussels were counting on a political solution, but weighing the possibility of some kind of messy workaround if Slovakia failed to pass the measure.
In a news conference following the failed vote, the leader of the opposition Smer party, Robert Fico said that the “government failed in its responsibility for governing and ruling, and the prime minister bears the blame for this international shame and scandal.” He said that his party was ready to discuss forming a new coalition government now that her party had lost the vote of confidence.
“We are waiting for proposals and initiatives from the coalitions, meetings, their ideas and their proposals,” he said. “We wait for proposals from their side.”
The prime minister, Iveta Radicova, called on her coalition partners to find an agreement with Mr. Fico’s party, which has the most representatives in Parliament. “We are a small and export-oriented economy and we need partners around us,” said Ms. Radicova. “I am convinced this government was and is a responsible, competent and reliable one.”
If nothing else, the unwieldy process underscored how the entire $590 billion euro stability fund, approved by the 16 other members of the euro currency zone, could be held hostage to the domestic politics of one tiny country, in this case Slovakia. It showed as well how a measure intended to increase confidence in the euro zone could instead emerge as a telling example of the shortcomings of a system that relies on an unwieldy group of nations to make and execute difficult decisions.
In Slovakia, it has been the leader of Freedom and Solidarity, Richard Sulik, who is also speaker of the Parliament, who has steadfastly refused to support the financial stability fund. Mr. Sulik contends that it is unfair to ask Slovakia, the second-poorest country in the euro zone, to guarantee loans for richer countries like Greece and Portugal.
“If Greece had gone bankrupt right and straight at the beginning of last year it would have been the sincere and honest solution,” Mr. Sulik said on the floor of Parliament Tuesday, and would be in better shape than it was today. With regard to concerns over undercapitalized banks, Mr. Sulik said, “We are not against rescuing banks, but against Slovakia rescuing foreign banks.”
At another point today, Sulik laid out an argument that I’ve got to believe resonates pretty strongly in a poor and only recently free nation like Slovakia:
“There’s a lot of talk at the moment about solidarity, that Slovakia must show solidarity with other countries,” Mr Sulik told foreign journalists last week.
“The average pension in Slovakia is less than 400 euros (£350). The average pension in Greece is 1,400 euros (£1,200) – three, four times higher,” Mr Sulik said.
“It’s impossible to explain to a Slovak pensioner that he or she has to contribute – in the form of higher VAT for example – towards Greek pensions. Or towards Italian MPs’ salaries, the highest MPs’ salaries in Europe,” he added.
“That’s not solidarity. That’s a perverse concept of solidarity,” he explained.
There’s supposedly going to be a second vote in Slovakia at some point, and there’s still a good chance that this thing will pass in the end. Nonetheless, it appears that this crisis is unveiling fault lines in the European “Union.”