Slovakia Rejects Euro Bailout

But the country’s leading opposition party said it would be willing to discuss support for the fund after the government fell, pointing to eventual approval of the deal. Officials in Brussels were counting on a political solution, but weighing the possibility of some kind of messy workaround if Slovakia failed to pass the measure.

If nothing else, the unwieldy process underscored how the entire $590 billion euro stability fund, approved by the 16 other members of the euro currency zone, could be held hostage to the domestic politics of one tiny country, in this case Slovakia.

In a vote of 55 for the measure, nine against and 60 abstaining, the Slovak governing coalition failed to muster the necessary votes to pass the plan that would have required them to contribute roughly $10 billion in debt guarantees to the fund.

The vote on expanding the size and powers of the fund, known as the European Financial Stability Facility, followed a day of speeches, recesses and hastily organized meetings to find consensus. The free-market Freedom and Solidarity Party, one of the four parties in the coalition, had refused to back it, a crucial factor in the expected fall of the government of the prime minister, Iveta Radicova.

Politicians in capitals across Europe watched the developments in Bratislava closely. An agreement to expand the fund was reached in July by the leaders of the 17 countries that use the euro. Malta approved the plan on Monday, leaving Slovakia as the last to take up the accord for formal consideration. The possibility that Slovakia, a former communist country with a population of just 5.5 million, could scuttle an agreement endorsed and passed by European powers like Germany, France and Italy had seemed inconceivable.

One European official speaking on condition of anonymity due to the delicacy of the issue said that, ultimately, it would probably be possible to go ahead with the bailout without Slovakia if necessary.

The rules of the E.F.S.F. were laid down in a “framework agreement,” rather than being written into the bloc’s governing treaty. As an inter-governmental agreement this benefits from “a certain flexibility,” said the official, adding that “in these sorts of cases, where there’s a will, there’s a way.”

Carving Slovakia out of the E.F.S.F. fund would be technically messy and would send a terrible signal about the readiness of all 17 nations to participate in the permanent bailout fund the E.U. wants to set up for the period after 2013.

Officials in Brussels believe thatthe vote could be reversed with Mr. Fico’s support as early as by the end of the week. But “the political damage of a repeated ‘no’ would be horrendous,” said the official speaking.

That means that negotiations are likely to be political ones, seeking to persuade politicians in Slovakia that it is in their interests to ratify the deal, and pointing out that self-exclusion could be harmful in the future if the Slovaks themselves need aid. The approval process, which has already lasted over two months, has been excruciatingly complex. At times it has seemed like a strange hybrid of a geography class and a civics lesson, wending its way from Helsinki in the north to the tiny Mediterranean island of Malta, from Germany’s Federal Constitutional Court in Karlsruhe to a Spanish Parliament in Madrid surrounded by police barricades to keep protesters at bay.

At each step the union has found a way to muddle through for the sake of unity and fear of the unknown. Specifically those fears center around the repercussions on financial markets and the risk that doubts, and with them speculative attacks, will increasingly spread to large economies like Spain and Italy should they fail to contain problems in Greece, Portugal and Ireland.

In Slovakia, it has been the leader of Freedom and Solidarity, Richard Sulik, who is also speaker of the Parliament, who has steadfastly refused to support the financial stability fund. Mr. Sulik contends that it is unfair to ask Slovakia, the second-poorest country in the euro zone, to guarantee loans for richer countries like Greece and Portugal. If the measure is approved, Slovakia will contribute roughly $10 billion in debt guarantees to the $590 billion euro zone stability fund.

“If Greece had gone bankrupt right and straight at the beginning of last year it would have been the sincere and honest solution,” Mr. Sulik said on the floor of Parliament Tuesday, and would be in better shape than it was today. With regard to concerns over undercapitalized banks, Mr. Sulik said, “We are not against rescuing banks, but against Slovakia rescuing foreign banks.”

Mr. Sulik called Ms. Radikova’s decision to hold a confidence vote along with the vote on the bailout fund “blackmail.” If the government loses the confidence vote, it would be up to Slovakia’s president, Ivan Gasparovic, to name an interim government until a new coalition can be agreed upon or a date chosen for early elections, said Marek Trubac, a spokesman for the president. In the meantime Ms. Radicova would continue in the position. Elections could not take place before “early spring,” Mr. Trubac said.

Few Slovaks want to foot the bill for other countries’ overspending. But surveys show that the European Union is popular in Slovakia, and people are very proud of having adopted the currency while neighbors like Poland and their former countrymen, the Czechs, have not.

“The image of Slovakia has already been damaged,” said Ivan Miklos, Slovakia’s finance minister. “Slovakia shouldn’t be viewed as the unreliable member of the euro club.”

Nicholas Kulish reported from Warsaw and Stephen Castle from Brussels. Adriana Lajdova contributed reporting from Bratislava, Slovakia.

Article source: http://www.nytimes.com/2011/10/12/world/europe/slovak-leader-vows-to-resign-if-bailout-vote-fails.html?partner=rss&emc=rss