SLOVAKIA’S GOVERNMENT HAS failed to reach a deal to prevent the potential collapse of the Europe-wide rescue plan for heavily indebted countries with a crucial parliamentary vote now set to take place today.
The passage of the deal through parliament is less than certain after the country’s four-party governing coalition was unable to agree a compromise on the passage of a motion that would approve the expansion of the European Financial Stability Fund (EFSF).
The EFSF is designed to shore up the continent’s defences against the debt crisis.
Mounting worries that Greece is on the verge of a default, a situation which would have worldwide economic repercussions, has led to the new enhanced fund which has been approved by all 16 Eurozone countries, aside from Slovakia.
“I have to say … that the coalition partners have failed to reach an agreement,” Prime Minister Iveta Radicova said in a brief statement about her governing coalition’s talks yesterday.
Talks will continue today with parliament to begin debating the bill at around midday. The all-important vote is expected to be held before the end of the day, according to the Guardian.
Slovakia a nation of 5.5 million people, would contribute about one per cent or €7.7 billion to the fund.
With the help of EU funds and foreign investments, it has benefited significantly from its membership in the Eurozone and the EU and become a leading European car exporter.
Analysts have warned that a Slovak vote against boosting the fund would send a bad signal to already nervous financial markets about the inability of Eurozone countries to unite to tackle the debt crisis.
The EFSF was primarily agreed at a summit of the Eurozone’s two biggest countries, France and Germany, in July where a “vast expansion” in the role of the fund was signed off on by Nicolas Sarkozy and Angela Merkel.
The key aspects of the proposals include expanding its effective lending capacity to €440 billion, giving it power to inject capital into banking institutions, and allowing governments to buy the bonds of distressed governments on the open market.
The proposals have done little to calm markets in recent weeks and it has been suggested that the fund could be expanded to as much €2 trillion through leveraging.
- additional reporting from AP
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