Slovakia’s opposition leader said lawmakers must find a way to approve Europe’s enhanced bailout fund, which was rejected yesterday amid a dispute over the future of Prime Minister Iveta Radicova.
Slovakia “must sign up to the rescue fund,” Robert Fico said late yesterday, adding that his party, which didn’t back the measure yesterday, is awaiting a proposal from the ruling coalition. Radicova said the only country in the 17 nations that use the euro that has yet to approve European Financial Stability Facility, must find a solution to approve the EFSF “as soon as possible.” No time for a new vote has been set.
“Eventually a yes vote will be secured,” Tim Ash, head of emerging-market research at Royal Bank of Scotland Group Plc in London, said by phone yesterday. “Does Slovakia really want to be alone among 17 euro-zone members states on this one, and when the future of Europe is at stake?”
The political turmoil in the country of 5.4 million people reverberated on global stock and currency markets. Slovak approval of enhanced powers of the EFSF, the temporary bailout fund, is crucial for adopting the key element in the strategy to prevent contagion from the debt crisis that has spread from Greece to other countries in the region.
Stocks retreated following the biggest four-day rally in global equities since 2009 and copper fell for the first time in five days as investors awaited Slovakia’s vote on enhancing the European bailout fund. Treasuries declined and the euro weakened versus the dollar.
The benchmark Stoxx Europe 600 Index slipped 0.3 percent to 235.28 at the close of trading, having earlier retreated as much as 1.2 percent. The gauge advanced 8.5 percent over the previous four days for its biggest rally since November 2008
Yesterday’s rejection cost Radicova her job as she tied the vote to a no-confidence motion in her Cabinet. Now she must find a way to rebuild a majority or face early elections. Finance Minister Ivan Miklos yesterday said the revamped EFSF will probably be passed this week.
“It’s clear that there’s a political will in Slovakia to approve the fund, however it was used as a power tool amid the coalition crisis and the whole of Europe was taken a hostage,” Petr Just, a political scientist at Metropolitan University in Prague said in a telephone interview before the vote.
A total of 55 lawmakers of the 124 present backed the motion, short of the required majority of 76 deputies. Nine were against it. The vote was destined to fail after the Freedom and Solidarity party, one of four coalition members, said it wouldn’t support the changes.
With average salaries still below those in Greece, it’s getting tougher to garner support among the poorest euro citizens for further aid to their Mediterranean partners.
As the crisis continues to engulf the euro region and threatens its lenders, German and French leaders at a meeting on Oct. 9 pledged to devise a plan to recapitalize banks, help Greece and strengthen Europe’s economic governance. German chancellor Angela Merkel, after meeting French President Nicholas Sarkozy, said Europe will do “everything necessary” to ensure that banks have enough capital.
The expanded powers of the 440 billion-euro ($600 billion) EFSF would allow the fund to buy the debt of stressed euro-area nations, aid troubled banks in the region and offer credit lines to governments. The EFSF’s current role is to sell bonds to finance rescue loans.