Thu, Oct 13, 2011 - Page 10 News List

Slovakia’s ‘no’ vote casts shadow over euro rescue

‘CONCERNED EUROPEANS’:George Soros and about 100 former European dignitaries said that the debt crisis could undermine or destroy the global financial system


Slovak Prime Minister Iveta Radicova, third left, talks to journalists during a press briefing after an unsuccessful vote on extending the European Financial Stability Facility in Bratislava, Slovakia, on Tuesday.

Photo: EPA

Lawmakers in the eurozone’s poorest member, Slovakia, cast a menacing new shadow over the 17-nation bloc’s debt crisis by rejecting an expanded bailout fund and tools to shore up enfeebled banks.

Tuesday’s “no” vote in Slovakia, the last of the euro nations to vote on strengthening the European Financial Stability Facility (EFSF), put in doubt a bailout boost promised for Greece and bank re-capitalization.

It served to bring down the center-right government of Slovak Prime Minister Iveta Radicova, who had turned the vote into a confidence motion. However, the opposition said it was ready for a re-vote, in return for snap elections.

The result, which depressed the euro and Asian stock markets in trading yesterday, defied warnings from the US and China for Europe to get its house in order quickly for the sake of the weakening global economy.

The 16 other eurozone members have already approved changes to the 440 billion euro (US$590 billion) EFSF, which was set up after Greece was bailed out to save it from default in May last year. Eurozone leaders agreed in July to boost the EFSF’s powers in the hope of stemming the fallout from the eurozone’s sovereign debt crisis, which now threatens the entire euro project and the bloc’s banking system.

All 17 nations must pass the deal for it to come into effect. Until then, the fund has barely 200 billion euros of firepower and most of that has already been committed to Ireland and Portugal.

Radicova’s no-confidence gambit failed in Slovakia with only 55 of 124 lawmakers present voting in favor. Nine were against and 60 abstained, including members of the left-of-center opposition Smer-SD.

The junior coalition liberal party Freedom and Solidarity deserted Radicova, angry that Slovakia would have to join a bailout fund for richer eurozone members. The Smer-SD said it still supported the revamped EFSF, but wanted early elections.

The new-look EFSF would be able to inject money into shaky banks or intervene instead of the European Central Bank (ECB) to support weaker eurozone countries facing problems in raising fresh funds on the markets.

Greece faces the acutest problems in rolling over its mountainous debts as financial markets fret over a potentially disastrous default and contagion spilling over into the rest of the eurozone.

The EU on Monday postponed a key summit and Euro Group President Jean-Claude Juncker admitted that a write-down of Greece’s debt could cost creditors much more than first thought.

The EU has promised a definitive solution before G20 talks on Nov. 3 and 4, to cover ailing Greece, its banks and, if the downward spiral continues, Belgium, Spain, Italy and even France.

Billionaire investor George Soros and about 100 former European dignitaries yesterday published an open letter warning that the eurozone debt crisis could bring down the global financial system.

“The euro is far from perfect,” they wrote in German business daily Handelsblatt. “The current crisis has shown that.”

“But as a reaction to that, we need to revise the weaknesses in its make-up rather than allow the crisis to undermine, even destroy, the world’s financial system,” they added.

The group, calling themselves “concerned Europeans,” appealed to governments to establish an institution that can provide liquidity to the whole eurozone, a strengthening of financial market oversight and a revised EU growth strategy.

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