Tags: Slovak | Parties | Euro | Rescue

Slovak Parties Reach Deal on Euro Rescue Fund

Wednesday, 12 Oct 2011 12:27 PM

 

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Parties in Slovakia's fallen government struck a deal with the leftist opposition on Wednesday to ratify a plan to bolster the eurozone's rescue fund by Friday, effectively ending a crisis that had threatened the currency's main safety net.

The approval for boosting the European Financial Stability Facility (EFSF) hit an obstacle a day earlier when a junior party in Prime Minister Iveta Radicova's government blocked its passage in a confidence vote that also toppled the cabinet.

Slovakia, whose 5.4 million people make up less than 2 percent of the currency bloc's population and 1 percent of its total output, is the only member not to ratify the plan to increase the EFSF's powers and fight the spreading debt crisis.

Ratification by all 17 members is needed for the changes to take effect, and the Slovak foot-dragging comes even as other European leaders wrangle over further steps to protect eurozone banks if Greece defaults on its debts.

Germany and France, the leading powers in the bloc, have promised to propose a comprehensive strategy to fight the debt crisis at an EU summit on Oct. 23.

After meeting the heads of the three centre-right government parties in favor of shoring up the EFSF, the leading opposition Smer party agreed to help them push it through in exchange for an election on March 10, rather than in 2014 as scheduled.

"The agreement makes it possible that either tomorrow night or at the latest, Friday morning, the EFSF and the laws tied to it will be approved," Smer leader and former Prime Minister Robert Fico said.

He said the vote would come "immediately after a constitutional law on holding early elections in March 2012 is passed". In another briefing, Mikulas Dzurinda, head of Radicova's SDKU party, confirmed the deal.

Fico had long pledged support for the rescue fund deal reached by European leaders in July but abstained from Tuesday's ratification as a tactical move to topple the government.

Radicova's cabinet will remain in office until a new administration is formed. Fico said he would remain in opposition until the election, but none of the coalition officials gave any details on how they may proceed.

Tuesday's vote rattled global markets frustrated with the eurozone's inflexible decision-making process at a time when Europe's crisis is seeping into countries with high levels of debt and threatening banks.

But the euro jumped to a one-month high against the dollar and yen, and global stocks rose to a three-week peak on news of the deal.

DEAL SEEN QUICK

Earlier on Wednesday, the presidents of the European Commission and the European Council urged a speedy resolution.

"We call upon all parties in the Slovak Parliament to rise above the positioning of short-term politics, and seize the next occasion to ensure a swift adoption of the new agreement," Commission President Jose Manuel Barroso and Council President Herman Van Rompuy said in a joint statement.

The fourth coalition member, Freedom and Solidarity (SaS), caused the cabinet to fall by not taking part in Tuesday's EFSF vote because its leader, free-marketeer Richard Sulik, argued that as the euro zone's second poorest member, Slovakia should not have to bail out richer countries like Greece.

Slovakia's portion of the 440 billion euros ($607 billion) in guarantees backing up the EFSF would be 7.7 billion — about 11 percent of its annual output. Sulik insisted this would be more than a fair share relative to Slovak living standards, which are 74 percent of EU average, below Greece at 89 percent.

Many Slovaks fear that preventing the EFSF expansion could help exacerbate a new global downturn like the one that sent their economy from 10.5 percent growth in 2007 to an almost 5 percent contraction two years later.

Opinion polls show about 45 percent of Slovaks support the deal, versus 36 percent against.

"It's embarrassing... I understand Sulik's arguments, and basically agree with them. But we don't live alone in a vacuum, rather we are in a society and we are responsible for it," businessman Jan Repa, 43, said.

President Ivan Gasparovic, responsible for appointing the next prime minister, cut short a visit to Asia to deal with the government collapse and was expected to return on Thursday.

© 2014 Thomson/Reuters. All rights reserved.

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