Austria Passes Expansion of Euro Bailout Fund

Despite sustained heckling from far-right legislators that compelled parliamentary leaders to call a temporary recess, the measure was approved by a healthy 117-to-53 margin. The vote meant that Austria agreed to raise its share of the bailout to 21.6 billion euros, or roughly $29.4 billion, from 12.2 billion euros.

The decision in Vienna left just 3 of 17 countries still waiting to approve the measure, which expands not only the size but also the powers of the bailout fund. With Malta and the Netherlands set to vote next week, pressure mounted on Slovakia, viewed by many as the last holdout.

One day after Germany’s Bundestag, or lower house, passed the same measure with a wide majority, Chancellor Angela Merkel was in Warsaw, where she met with Slovakia’s prime minister, Iveta Radicova, on the sidelines of a European Union summit meeting. Ms. Radicova told reporters that she expected Parliament to ratify the fund no later than Oct. 14, Reuters reported.

But the Slovak government’s majority in Parliament rests on four parties with divergent views, and many Slovaks feel that asking poorer Central Europeans to pay for the mistakes of the richer Greeks is unfair. One of the junior parties in Ms. Radicova’s coalition, the Freedom and Solidarity Party, abbreviated in Slovak as SaS, opposes the bailout, but in recent days it has signaled some willingness to compromise.

With Germany’s weight behind the fund, known as the European Financial Stability Facility, political commentators say it is only a matter of time before Slovakia bows under the pressure and approves its own version of the bill.

The need to ratify the July agreement to expand the facility is all the more important in light of the fact that markets have already indicated that even a 440 billion euro fund, or roughly $600 billion, was nowhere close to enough money to fend off speculative attacks against heavily indebted countries, especially if larger countries like Spain and Italy are forced to turn to it for assistance.

Even as national parliaments have moved ahead with ratifying the agreement, Greece’s prime minister, George A. Papandreou, has pressed his case that his country will live up to its commitments to its European partners. Mr. Papandreou visited France’s president, Nicolas Sarkozy, in Paris on Friday.

Greece’s ability to stick to the difficult program of budget austerity has been viewed as crucial if it is to continue receiving aid. Mr. Papandreou also visited Berlin to meet with Mrs. Merkel Tuesday night.

But the euro crisis will never be resolved if debtor countries cannot take credible steps to reduce their national debts, said Norbert Irsch, chief economist at KfW Group in Frankfurt.

But he dismissed calls for Greece to leave the euro. Such a suggestion, he said, “does not sufficiently take into account the fact that the country would be plunged into an even more serious and long-lasting crisis.”

As the debate in Austria indicated, feelings run high on the subject of bailing out neighbors. Members of the far-right Alliance for Austria’s Future unfurled a banner on the floor of the chamber demanding a referendum.

Peter Filzmaier, a professor of political science at the Danube University Krems, said that the far-right parties saw the rescue fund more as an opportunity to score political points than a chance to alter the outcome.

“It was a very emotional debate,” Mr. Filzmaier said. “Austria has an extremely large number of people disinterested in the E.U., and when you’re talking about large sums of money and you don’t understand what is going on you get scared.”

The German news media declared Thursday’s vote a victory for Mrs. Merkel, while asking how far she could push her intransigent coalition for further steps to rescue the currency. Germany’s upper house, the Bundesrat, where delegations from the country’s states must approve legislation, signed off on Thursday’s vote in the Bundestag. But Bavaria’s state premier, Horst Seehofer, said Friday that his state would not support “additional increases or greater risks.”

Mrs. Merkel has faced criticism of her leadership almost from the beginning of the crisis, from the right and the left, domestically and from foreign leaders, including President Obama. She has been attacked in particular for being slow and reactive in dealing with market turmoil and with speculative attacks on fellow members of the euro zone.

The muddling-through approach is criticized by academics, who find that it “does not fit into the worlds of models and textbooks,” said Mr. Irsch, but the German government and the European Central Bank “have acted in a pragmatic way and, in my opinion, also in a fitting manner.”

Article source: http://www.nytimes.com/2011/10/01/world/europe/austria-approves-euro-bailout-fund.html?partner=rss&emc=rss