Temporary Relief Slovakia Approves Euro Bailout Expansion
The Slovak parliament voted on Thursday to approve the expansion of the euro bailout fund. An earlier rejection forced the current government to agree to new elections in exchange for opposition support for the measure, which will increase the rescue package's lending ability and reach.
In a second vote Thursday on the euro bailout fund, the Slovakian national parliament passed legislation approving additional powers for the European Financial Stability Facility (EFSF). In a dramatic move, the parliament in Bratislava had rejected the legislation on Tuesday, unsettling markets and European leaders. Slovakia had been the last of 17 euro-zone members to approve the measure.
On Thursday, 114 members of parliament from governing parties and the opposition voted in favor of the EFSF, well above the 76 who were needed. Only 30 voted against it and three lawmakers abstained.
The move came one day after three parties in the governing coalition struck a deal with the main opposition party, the social democratic SMER. Prime Minister Iveta Radicova had pegged Tuesday's vote to a motion of confidence, which her government failed. The vote led to the collapse of her government and the coalition, now in a caretaker role, has since agreed to new elections in March in exchange for SMER support of the euro bailout measures.
Increased Lending Power
The expanded EFSF will now have 440 billion ($600 billion) in real lending capacity at its disposal, allowing it to buy up bonds of debt-strapped euro-zone countries, provide liquidity to banks and also lend money to governments in trouble. It has been seen as a critical measure for halting the contagion of the European debt crisis.
In Slovakia, the EFSF measure had been staunchly opposed by the neo-liberal Freedom and Solidarity (SaS) party. Leader Richard Sulik last week described the euro backstop fund as the "greatest threat to Europe." As one of the poorest countries in the common-currency zone, Sulik defended his position in a SPIEGEL ONLINE interview last week. "Slovakia has the lowest average salaries in the euro zone," he said. "How am I supposed to explain to people that they are going to have to pay a higher value-added tax so that Greeks can get pensions three times as high as the ones in Slovakia?"
-- dsl, with wires