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Slovakia rejects expanded eurozone bailout fund

Slovakia rejects expanded eurozone bailout fund

October 11th, 2011 in News

BRATISLAVA, Slovakia (AP) - Slovakian lawmakers on Tuesday rejected participating in an expanded euro rescue fund aimed at shoring up confidence in the ability of euro members to survive the financial crisis.

Slovakia's 1-year-old coalition government also fell with the vote because the prime minister had tied it to a confidence measure.

After 10 hours of debate in Parliament, the measure calling on Slovakia to support the expansion of the bailout fund failed to pass by 21 votes.

"Today we saved more than 300 billion euros for the European taxpayers that would have been used to bail out banks," said Parliament Speaker Richard Sulik, who led Parliament's opposition to the expansion of the bailout fund.

Slovakia remains the only country in the 17-member eurozone that has not approved the package of measures, which requires unanimous support to go into effect. The euro stability fund is designed to boost Europe's firefighting capabilities in the financial crisis.

Prime Minister Iveta Radicova had urged the lawmakers to back the bill, arguing the country was losing its credibility.

"It is the entire eurozone system which is under threat at the moment, not just a few small countries anymore," Radicova said in the debate in Parliament. "Our euro is under threat. The changing situation needs a quick and immediate reaction."

Earlier, Radicova had admitted a coalition partner was not convinced.

EU officials still could find a way of getting around the Slovakian rejection of the bill to boost the powers and size of the euro bailout fund, which is designed to contain debt market turmoil, but doing so would carry costs to European unity.

The "no" vote will further complicate the eurozone's efforts to deal with the crisis, which already has seen three countries get bailouts and raised fears of a Greek default and massive losses for banks.

As the vote loomed, European Central Bank head Jean-Claude Trichet gave one of his most emphatic warnings yet about the need for swift action to quell the crisis, which he called "systemic."

"The high interconnectedness in the EU financial system has led to a rapidly rising risk of significant contagion," Trichet told a committee of the European Parliament. "This threatens financial stability in the EU as a whole and adversely impacts the real economy in Europe and beyond."

In a desperate attempt to get her recalcitrant coalition partner to back her, Radicova said the vote will be linked to a "confidence vote" in the government, a move described as blackmail by Sulik, chairman of the Freedom and Solidarity party and the major opponent of the fund.

In the debate, Sulik argued the expanded fund made "no sense" because it would not have enough money to help big EU economies like Italy and Spain and it would be "an honest solution to let Greece go bankrupt."

It is not for the first time Slovakia has been against major eurozone policies since it adopted the currency in 2009. Last year, it rejected providing its (euro) 800 million ($1.1 billion) share of the (euro) 110 billion EU bailout plan for Greece. That rescue went ahead without Slovakia, but another exemption for the country would cast doubt over the eurozone's credibility and ability to function as a bloc.