Resenting Greece: Slovakia Threatens Euro Rescue Package

Having suffered painful, self-imposed economic reforms, Slovakia doesn't see why it should help bail out euro-zone partners like Greece. Prime Minister Iveta Radicova is trying to talk her country into solidarity, but has become increasingly isolated in her position.

Slovakia pulled itself out of its crises alone -- and doesn't see why it should help Greece.

Foto: JOE KLAMAR/ AFP

Last Wednesday Slovak teachers took to the street, more than 8,000 of them striding along the asphalt of Bratislava's old city center. There they voiced anger about poor pay and dilapidated schools. "We've been tightening our belts for decades," shouted one speaker, "and our trousers are still falling down."

On Thursday the doctors' union reported that 1,500 doctors out of a total 6,500 working in state-run hospitals want to resign in protest of unsatisfactory pay and poorly equipped facilities.

The government under the Prime Minister Iveta Radicova has turned the population against itself. Despite an impressive economic record, the country is still Europe's second poorest and in some regions one in three people are unemployed. The government leader has adopted a tough cost-cutting plan and can hardly dare asking for more from her people. But that's exactly what she must do: Slovakia is obligated to contribute some €7.7 billion ($10.9 billion) to the euro-rescue fund. It's a hefty sum for the formerly communist country with a mere 5.4 million inhabitants. At the moment it is highly unlikely that Radicova can rally a parliamentary majority to support the plan.

In Brussels the Slovaks are already notorious for their lack of solidarity. A year ago the prime minister and subsequently the parliament rejected calls to provide any financial help for Greece . Slovakia has put up with painful reforms "without being given a cent," the prime minister argued back then.

'A Direct Path to Socialism'

But there is more at stake in autumn 2011. If Slovak parliamentarians vote against the new EFSF then the plan to support highly indebted nations will collapse. That scenario could lead to the demise of the common currency and no one knows for sure which countries could be brought down along with Greece.

For this reason Radicova has spoken out in favor of the rescue package -- but she is virtually alone in this. Leading the chorus of opposition to the EFSF fund is her coalition partner, Richard Sulik of the Freedom and Solidarity (SaS) party, whose votes she relies on. The rescue payments would lead the country "on a direct path towards socialism," he has warned, "we have to let Greece go bankrupt."

Sulik, who is also speaker of parliament, does not approve of state actors or the EU getting mixed up in the economy. He himself owes his business success to the fact that Slovakia has fewer market regulations than most European countries. The self-made man, whose risk-taking entrepreneurial spirit made him a millionaire, has become an icon of success in Slovakia two decades after the end of communism.

Liberal to the Core

Sulik laid the foundations for his financial success with a chain of copy shops in the early 1990s. But it was only in 1998 that Slovakia's transformation really picked up momentum. As a member of a young radical troop around the Finance Minister Ivan Miklos, Sulik helped to turn Slovakia into a particularly liberal European nation.

At the heart of the reforms was the "flat tax" policy which applied to business people as well as private individuals. In Slovakia everyone pays 19 percent tax, a low rate which had the economic impact of a stimulus package. Investors flocked to the country, which had been largely unknown until then.

These days Samsung builds televisions at the base of the Tatra mountains, VW makes its Touareg there, Porsche builds Cayennes and Audi manufactures the Q7. The Korean car maker Kia invests in Zilina and Peugeot works in Trnava. In 2007 the economy grew by more than 10 percent. In January 2009 it joined the euro zone.

Slovakia earns about a quarter of its economic performance from the automobile industry, which also means that the global economic crisis is keenly felt along the Danube. In 2009 gross domestic product (GDP) shrank by almost five percent.

'They Should Manage on their Own Too'

But the government in Bratislava did not allow itself to be swayed from its liberal track: Instead of borrowing money for stimulus packages or raising taxes it chose to levy a strict savings programme on its population. It cut money for schools, hospitals and streets. In 2013 it should, once again, fulfil the Maastricht criteria. In the first quarter of 2011, the economy grew by about four percent.

Because Slovakia has now been forced to free itself from economic misery for the second time, many Slovaks are not willing to pay for Greek debt. To them, Greece was always on the other side of the Iron Curtain and from a Slovak perspective that means they were in a region of immeasurable wealth.

"Slovakia is dominated by a kind of head-of-the-class mentality," said one German manager in Bratislava. "The message is: We pulled through thanks to our hard work and hardship -- and, above all, without help. Now the others should manage on their own too."