After lawmakers rejected measures to expand the European Financial Stability Facility, Slovakia’s political parties are rushing to find a way to approve the enhanced rescue fund. Prime Minister Iveta Radicova wants to start talks today with the opposition on a second vote.
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Slovakia is the only remaining country in the 17-member euro zone that has not approved measures that would increase the EFSF’s effective lending capacity to 440 billion euros, give it the power to inject capital into banks, and allow it to buy the bonds of distressed governments on the open market. Slovakia, one of the poorest countries in the euro zone, is being asked to guarantee 7.7 billion euros of the 440 billion-euro fund.
Slovakia “must sign up to the rescue fund,” said Robert Fico late yesterday. Fico’s party did not back measure yesterday because it couldn’t support Radicova’s government, but is awaiting a proposal from the ruling coalition. Slovak approval of the enhanced rescue fund is crucial for its adoption, as all members of the single-currency zone must approve the new measures for them to be enacted. The enhanced EFSF is considered necessary to prevent contagion from the region’s sovereign debt crises from spreading.
German Chancellor Angela Merkel said today that she is “certain” Slovakia will ultimately approve the package before European Union leaders meet on October 23. “Eventually a yes vote will be secured,” said Tim Ash, head of emerging-market research at Royal Bank of Scotland Group Plc (NYSE:RBS) in London. “Does Slovakia really want to be alone among 17 euro-zone members states on this one, and when the future of Europe is at stake?” Slovakian Finance Minister Ivan Miklos said yesterday that the revamped EFSF will probably be passed this week.
Radicova thinks failure to accept the measures will put Slovakia’s future in Europe at stake. Slovakia just joined the euro zone in 2009. “It’s unacceptable for a prime minister to allow the isolation of Slovakia.” The Cabinet must resubmit the request for approval of the measures to parliament for a repeat vote. Yesterday’s vote may have cost Radicova her job, as she tied it to a no-confidence motion in her Cabinet. She must now find a way to rebuild a majority, otherwise she will face early elections.
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“It’s clear that there’s a political will in Slovakia to approve the fund. However, it was used as a power tool amid the coalition crisis and the whole of Europe was taken a hostage,” said Petr Just, a political scientist at Metropolitan University in Prague. Only 55 of the 124 lawmakers present for the vote backed the motion, well short of the required majority of 76 deputies. However, only nine voted against the measure, while the remainder abstained.